Broadcom-CA deal memo spurs US stock-fraud probe

Bloomberg

US authorities have opened investigations into whether shares in Broadcom Inc. and CA Technologies Inc. were the target of a stock-manipulation scheme, according to people familiar with the matter.
The inquires are related to Broadcom’s announcement that lawmakers were given what purported to be a US Defense Department assessment of national-security concerns surrounding Broadcom’s planned purchase of CA. That memo was falsified, Broadcom said, citing the Defense Department.
The Justice Department and Securities and Exchange Commission are both asking whether the memo may have been part of an effort to manipulate the companies’ share prices, the people said. Shares of Broadcom and CA fell as the tie-up came under scrutiny. Senator Rand Paul called for a national security panel to investigate the $19 billion acquisition by Broadcom, a semiconductor maker, of software company CA, which the companies have said will close by the end of the year.
Broadcom contacted the authorities about the memo and was told that investigations had been initiated, according to one of the people familiar with the situation. They said the Justice Department’s probe is being handled out of the Southern District of New York, which has jurisdiction over Wall Street and often spearheads enforcement of stock manipulation and other securities fraud cases.
Representatives for the Justice Department and SEC declined to comment. Authorities typically launch investigations following a public fraud claim such as the one made by Broadcom. The probes into the memo are preliminary and may not conclude that anyone attempted to manipulate Broadcom’s stock price. A memo matching the one described to Broadcom was provided to Bloomberg anonymously earlier this week. The four-page document, which Bloomberg has not published, purported to be written by an official inside the Defense Department.
The author argued that Broadcom, while domiciled in the US, has deep ties to China. The author said that Broadcom’s purchase should come under scrutiny because CA makes software for strategic financial, energy and government applications.
The Defense Department, in a statement, said: “Our initial assessment is that this is likely a fraudulent document.”
Concerns similar to those outlined in the memo were raised by Senator Paul at a Senate hearing. Paul said later in the day he had sent a letter to Treasury Secretary Steve Mnuchin seeking a security review of the deal by the Committee on Foreign Investment in the US, or Cfius.