Emulex Corp., in its effort to fend off a hostile takeover, filed suit alleging that Broadcom is a criminal enterprise, because its co-founders created a culture of illegal drug use, hiring prostitutes, payoffs and death threats that should disqualify the Irvine company from buying its cross-county counterpart.
“Fundamentally, it is material for Emulex stockholders and employees to understand that they are not dealing with an honest enterprise,” Emulex’s lawsuit in Orange County Superior Court says. “It is material for the stockholders and employees of Emulex to understand the breadth and depth of Broadcom’s wrongdoing, including the willingness of principal owners, officers and directors to engage in wrongdoing… In fact, the breadth and depth of Broadcom’s pattern of civil and criminal violations requires that all of Broadcom’s statements be viewed with distrust.”
Broadcom responded with a statement calling the accusations irrelevant to its tender offer, which it intends to pursue.
“We think that Emulex shareholders deserve better than mud slinging and 
scorched-earth tactics designed to block shareholders from their ability to accept our offer,” Broadcom spokesman Bill Blanning said.
“Despite these recent moves, we remain open to holding substantive discussions to bring this transaction to a close,” the statement said.
Emulex said in a statement that Broadcom’s latest overture was nothing new.
“Broadcom is continuing its campaign of misleading statements,” Emulex said.
A Broadcom advisor approached an Emulex advisor late last week but had no new information to provide, other than what they have already made public to-date, that warranted engagement by Emulex.”
Following the news, first reported by the Wall Street Journal Monday, shares of Emulex fell 4% to $10.50 while Broadcom gained more than 4% to $26.50 in early trading.
Broadcom has 30 days to respond in court to the lawsuit, which seeks an injunction against the hostile takeover attempt.
In April, Broadcom proposed to pay $764 million or $9.25 a share for Costa Mesa-based Emulex. Emulex shareholders have until June 4 to respond to the offer, but it can be extended indefinitely.
The lawsuit cites federal criminal and civil cases against Broadcom’s co-founders Henry Samueli and Henry T. Nicholas III as reasons to distrust the Irvine chipmaking company. Nicholas has pleaded not guilty to 25 criminal charges alleging securities and accounting fraud and to dealing illegal drugs. Samueli pleaded guilty to one count of lying to federal investigators about his role in issuing executive stock options.
Nicholas quit Broadcom in 2003 and Samueli stepped down as chairman and chief technical officer in May 2008. But the two co-founders still control almost 60% of Broadcom’s voting stock and Samueli continues to work as a consultant.
“A conspiracy exists to conceal the continued participation of its two majority voting shareholders in Broadcom’s continuing, nefarious enterprise,” the lawsuit said.
To read the lawsuit, CLICK HERE.
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