The Samurai | Richard Marmaro

BY GABE FRIEDMAN

Before Broadcom Corp.'s former chief financial officer ever faced criminal trial for backdating stock option grants, attorneys following the case were scratching their heads. Given the evidence, they asked, how can you defend this case?

The defendant's attorney Richard Marmaro, of Skadden, Arps, Slate, Meagher & Flom in Los Angeles, came out swinging early, arguing backdating stock options - to make them more valuable without having to record the extra expense - did not rise to criminal conduct.

From the beginning, Marmaro pulled no punches: stock option backdating was an accounting error, and the SEC is overreacting, he said.

Other attorneys saw it differently, but Marmaro turned out to be far ahead of them - both in his understanding of how stock option backdating cases would play to a jury and the amount of billable hours he racked up working on the cases. As corporate law firms across the U.S. have bulked up their white-collar criminal defense practice groups, no one has been more successful at it than Marmaro.

Looking back at the middle of the decade, the backdating scandal exploded at an inopportune moment for those involved. The nation was still reeling from the dramatic failures of Enron and WorldCom Group when the first companies began to announce internal investigations into past grants. A certain hysteria infiltrated corporate America, as hundreds of companies acknowledged problems with their past stock option grants. The situation left an impression of out-of-control executives engaged in fraud, greed and general excess.

Marmaro - who prefers to call it retroactive-pricing rather than backdating - was involved at every stage of the process from the first case to the last case, and became an informal spokesman for all corporate executives helping to diffuse the situation. In the end, there were far fewer prosecutions than many lawyers guessed there would be, and even fewer convictions.

"Much of what is pejoratively called 'backdating' was actually undertaken in good faith," he wrote in an op-ed published in the Wall Street Journal in 2007 before any trials. "During the Internet boom, Silicon Valley high-tech companies were hiring so many new employees and awarding so many options grants that paperwork errors led to changed grant dates. Yet these occasions have been lumped into the so-called 'backdating' pool, and portrayed as a harbinger of the next Enron."

Marmaro scaled a steep wall to win the case: The company recorded a $2.2 billion accounting restatement in 2007 because of a problems with its past stock option grants. Its top executives had authored e-mails that a jury could easily view as damaging.

Fearless in his conviction that prosecutors had trumped up the evidence, he convinced the judge in Broadcom to dismiss all charges against his client, as well as three other Broadcom executives - including two who had already pleaded guilty to felonies in connection with their role backdating stock options.

"I look at the Broadcom case as a bookend, that essentially put an end to these stock option backdating cases," he said.

His work did not come for free: Broadcom announced in 2009 that its legal fees were more than $100 million because of the stock option fallout - a significant portion of which must have gone to Marmaro and his team of a half-dozen lawyers at Skadden. He declined to comment on legal fees.

In the case of Brocade, whose former Chief Executive he defended at his first trial and whose conviction was reversed by an appellate court, announced it spent a similar amount on legal defense.

In between stock option cases, Marmaro has scored some nice victories for other sectors of corporate America, such as a summary judgment motion he won for a former board of Fidelity National Financial Inc. accused of insider trading.

His client had learned about an impending acquisition of Lending Tree, and made a tidy profit off some stock trades. Marmaro persuaded a judge that the Securities and Exchange Commission was incorrect to call this insider trading.

"Even if the information was otherwise confidential, Fidelity was not obligated to maintain it confidentially simply because Lending Tree elected to communicate the information to it," U.S. District Court Judge Margaret Morrow wrote in a 49-page opinion dismissing the case.

Marmaro said he treated the case like all his others - as soon as the client told him he wanted to fight, he rolled up his sleeves and began working.