According to the SEC, Broadcom founders Henry Nicholas III and Henry Samueli and two other executives were involved in a scheme to backdate employee stock options. Backdating, which may have been more widespread than we know, didn't come to light until just a few years ago.
When a corporation grants stock options to an employee, it is supposed to be honest about the grant date. Backdating refers to the practice of selecting a date from the past when the stock price was at a lower and more favorable level for the employee. This is one way to recruit or retain valued employees. If the options are already in the money, the employee is less likely to leave.
About two years ago I had a conversation with former SEC chairman Harvey Pitt about this issue. Interestingly, he said the practice itself may not necessarily be illegal as long as it is fully disclosed. Microsoft, for example, routinely backdated options, but it also disclosed doing so in its SEC filings. Pitt, however, said that failing to disclose is outright fraud.
Apparently a number of other high profile companies, most notably Apple, have also engaged backdating options. However, some commentators have said the SEC is reluctant to go after Steve Jobs, Apple's founder, savior, and CEO. But these latest charges against the Broadcom executives indicate that the SEC considers backdating a serious offense. We may hear about more such cases in the future.