For nine years, William Ruehle was the chief financial officer of Broadcom.
Then, in 2006, Ruehle and Broadcom got caught up in the options backdating scandal.
Ruehle and other executives at Broadcom were among a dozen or so technology company executives who were hit with federal criminal indictments charging that they misled investors by not properly accounting for the backdating of options.
One problem for federal prosecutors – Ruehle believed he didn’t commit a crime.
And he hired Rich Marmaro and his white collar criminal defense team from Skadden Arps – to prove his case.
And in a remarkable two-month trial in 2009, they fought back against what they alleged and what the judge agreed was prosecutorial misconduct.
After trial, the charges were dismissed.
Ruehle has written a book that is destined to become an instant classic in the annals of corporate and white collar crime.
Ruehle spent nine years at Broadcom, helping the company evolve “from a small aspiring private company to an industry powerhouse,” he writes.
But when the options backdating scandal hit the fan at Broadcom, the search for scapegoats was on.
“Now, the company was throwing me under the bus,” Ruehle writes.
Ruehle is not a lawyer. But he is a quick learner.
And it didn’t take him long to learn about the key document in corporate crime law.
The Holder memo of 1999.
Ruehle reprints the entire memo at the back of his book.
And in a section titled “Why Would a Company Turn on Its Own?,” Ruehle learns that the memo “promised corporations cooperation points if they took action ‘to discipline or terminate wrongdoers.’”
“In other words, give us some sacrificial lambs and maybe we won’t prosecute you as a corporation.”
“And by the way, offering up sacrificial lambs draws attention away from yourself – whether you be other corporate executives or board members.”
And Ruehle was the designated sacrificial lamb at Broadcom.
But Ruehle was not one to go off to slaughter without a fight.
Broadcom’s lawyers – Irell & Manella – suggested he get a lawyer.
“Wilson Sonsini was recommended to me by the Irell & Manella people both for civil and criminal,” Ruehle told Corporate Crime Reporter in an interview last week.
But soon Ruehle was not happy with his lawyers.
“It seemed like my attorneys at Wilson were spending a lot of time trying to persuade me on how important it might be to try and reach a plea agreement with the other side,” he said. “That didn’t make sense to me. I didn’t think I had done anything illegal. So, it didn’t make any sense that I should plea to something.”
“I didn’t like the direction it was going. It seemed like my attorneys were better at pointing out all of the merits of the government’s case than the merits of my case. So, I talked with some others who had some experiences with the law.”
“I got a recommendation from Frank Quattrone to call Rich Marmaro at Skadden.”
So, Ruehle switched from Wilson Sonsini to Skadden Arps.
What changed when Ruehle got the new lawyers?
“There was no more talk about entering a plea,” Ruehle said. “It was – okay let’s learn all of the facts of the case. We’re going to fight and win this case.”
“After the case, I asked my attorney Rich Marmaro – when did you come to the conclusion that I was not guilty?”
“And he said – the very first time he talked to me.”
“I remember asking Rich early on – how does he think the Assistant U.S. Attorney is going to react when they hear he’s my attorney? And he said – he’s going to know we’re going to fight.”
“I don’ t know what Skadden’s record is on plea agreements. But they are reasonable attorneys. If they thought their client had no chance at trial, I don’t think they would subject their client to trial.”
Early on in the case, Ruehle caught a break.
His case was assigned to Judge Cormac Carney.
Ruehle says he believes the judge saw him “as a straight shooter.”
And Ruehle believed the judge to be fair.
“One of the co-founders of the company – Henry Samueli – cut a deal with the prosecutors that would involve no prison time but a large fine – a $12 million fine,” Ruehle said.
“The prosecutors can present anything they want. But the judge rules on whether an agreement is acceptable. And the judge said – no, that is not acceptable. There are serious charges that these gentlemen are charged with and if convicted, they can spend the rest of their lives in prison.”
“And if that is the case, because of Henry Samueli’s involvement in the company, he wasn’t going to walk free. And the judge said – this $12 million fine sounds like justice is for sale. And he said – it’s not for sale, not in his courtroom. So, he turned down the plea agreement.”
After an eight week trial, Ruehle’s defense team filed two motions – a Rule 29 motion to dismiss the charges for lack of evidence, and a motion to dismiss the charges for prosecutorial misconduct.
For Ruehle, D-Day was December 15, 2009.
“The judge walks into the courtroom,” Ruehle says. “We learned over the weekend that the judge had also invited company founders Henry Samueli and Henry Nicholas and Broadcom general counsel David Dull. We were the four accused by the SEC.”
“Only two of us had been accused by the Department of Justice.”
“Had there been an SEC trial, it would have been before Judge Carney.”
“The SEC case had been stayed pending the criminal trial. There were at least two SEC attorneys in the courtroom every single day of the trial. They were working closely with the Department of Justice.”
“The judge asked all four of us and our attorneys to be there December 15. And the media was there. It was a circus on December 15, 2009. The trial started October 20 of that year.
The courtroom was packed. There was an overflow room with a video feed in it because there were so many spectators. There were a lot of reporters.”
“The judge walked in. He greets all of the attorneys and he reads his opinion. By the time he was into about his third paragraph, I could breathe again.”
“He said for me to receive a fair trial, I must have the ability to call witnesses. And the government had improperly influenced three key witnesses – Henry Samueli, by getting this bogus plea agreement, David Dull, by putting him on ice, as the judge put it.”
“And Nancy Tullos was the VP for human resources. She was the government’s star witness. She had also pled to a non-existent crime.”
“The judge said the government had 26 meetings with her to prep her for her testimony. The judge said he had no confidence that what she said was from her own recollection as opposed to what the government wanted her to recall.”
“He said her evidence would have to be struck from the record.”
“Therefore, there was no evidence of any kind of criminal activity. So, he granted the Rule 29 motion.”
“He also ruled there was prosecutorial misconduct. That would cause the trial to be dismissed, but the government could retry it.”
“Rule 29 for me is the same as a jury acquittal. I could never be retried for that. He also dismissed the case against Henry Nicholas. On the drug case against Nick, the judge asked the government to come back to him within 30 days to explain why that case should go forward.”
“Within a week or so, the government dropped that case.”
“He also dismissed without prejudice the four SEC cases and asked the SEC to come back and say why those cases should go forward.
“Within about six weeks, the SEC came back and said – we are not going forward.”
“He had already dismissed the Henry Samueli plea agreement. And he dismissed the Nancy Tullos plea agreement. So, it was a big day.”
Did Ruehle get emotional while he was reading his decision?
“I did a pretty good job of covering it up. But it’s hard not to be emotional when that happens,” Ruehle said. “Afterwards, outside, I was surrounded by media asking — how does it feel? I was just kind of numb. I can’t throw the switch. I had been fighting it for three and half years. Now, all of a sudden, this cloud is lifted. It’s hard to know how to react.”
Did anything happen to the prosecutors?
“The lead prosecutor was investigated by the Department of Justice. I know they interviewed the judge and the defense attorney.”
“I don’t know the result. He’s still working there.”
“The number of prosecutors accused of misconduct is fairly large. About once a week, there is a finding of prosecutorial misconduct in California. But only a handful of prosecutors are disciplined. And usually, it’s a wrist slap.”
What has been the impact of your case on the practice of white collar criminal law?
“I would hope prosecutors would realize that they should be after the truth, as opposed to a conviction. Whether that has happened or not, I really don’t know.”
What was Ruehle’s strategy to survive the trial?
“The strategy was — I’ve been accused of these horrible crimes. How am I going to react to this? You can get yourself into a total state of depression, outrage, or obsession in fighting it.”
“Or, you can say — this is a very serious issue. I will give it all of the attention it deserves, but not attention it doesn’t deserve. I’m not going to buy into the fact that I’m a felon, as the government is accusing me of being.”
“One way I can cope with this is to carry on a life and not get into a depression. I said to myself, even if I’m convicted, I’m not going to think of myself as a felon, because I know in my heart I had absolutely no criminal intent and that I did not commit any criminal acts.”
[For the complete q/a transcript of the Interview with William Ruehle, see 27 Corporate Crime Reporter 3(9), January 21, 2013, print edition only.]