Former Broadcom CEO indicted on conspiracy, drug charges

Federal indictments include a total of 25 counts against co-founder and former CEO Henry T. Nicholas III.

Broadcom co-founder and former CEO Henry T. Nicholas III is facing two federal indictments that allege conspiracy and securities fraud related to options backdating, as well as numerous drug violations.

The federal indictments, unsealed on Thursday, include a total of 25 counts against Nicholas. According to an Associated Press report, the charges include conspiracy, securities fraud, false certification of financial reports, filing false statements with the U.S. Securities and Exchange Commission, wire fraud, and conspiracy to distribute and acquire controlled substances.

The indictment also names Broadcom's former chief financial officer, William J. Ruehle, who faces conspiracy, securities fraud, and other charges. He is not charged with drug violations.

The San Francisco Chronicle has reported that Nicholas was in custody after turning himself in to FBI agents in Santa Ana, Calif. Nicholas and Ruehle were scheduled to appear in court later Thursday, the newspaper's Web site said.

Mark Saylor, a spokesman for Nicholas, referred the Associated Press to another spokesman, who said that lawyers for the Broadcom co-founder had no comment.

Last month, the Securities and Exchange Commission charged Nicholas, Henry Samueli, David Dull, and Ruehle in a civil suit, accusing them of fraudulently backdating stock options that resulted in more than $2 billion of restated expenses. In May, Samueli and Dull both went on a leave absence from their roles as CTO and general counsel, respectively. Samueli also stepped down as chairman, according to a company press release.

While the options backdating issue is certainly nothing to sneeze at, the drug allegations are definitely more titillating and, quite frankly, much more bizarre.

Here's a sampling of some of the allegations from the indictment highlighted in a Wall Street Journal law blog:

•&nbsp Beginning in 1999, and continuing through 2005, Nicholas and other co-conspirators conspired to distribute MDMA (ecstasy), cocaine and methamphetamine; and, to maintain places, namely, the Rodeo Residence, the Warehouse, the Telescope House, and the Turnberry Condo, for the purpose of distributing and using controlled substances.

•&nbsp Nicholas directed co-conspirators and associates to invoice him for controlled substances using various code words, including "supplies," "party favors," "refreshments" and "E" (ecstasy).

•&nbsp Nicholas spiked the drinks of others with MDMA (ecstasy) without their knowledge, including the drinks of technology executives and representatives who worked for Broadcom's customers.

•&nbsp Nicholas hired prostitutes and escorts for himself and customers, representatives, and associates of Broadcom.

•&nbsp In or around 2001, Nicholas distributed and used controlled substances during a flight on a private plane between Orange County and Law Vegas, causing marijuana smoke and fumes to enter the cockpit and requiring the pilot flying the plane to put on an oxygen mask.

Nicholas, 48, served as CEO and president from Broadcom's inception until he resigned in 2003. A billionaire since the company had gone public in 1998, he had always been a larger-than-life character with a personality that matched his 6-foot-7-inch physique. He was known for his bold and often outrageous predictions for the communications market and for Broadcom in general.

He was also known for his wild parties often thrown at his Orange County mansion that sported several touch-screen, wall-mounted computers, a hidden wooden panel in the study that opened to a secret underground tunnel to a gym, a sports bar, a wine cellar, a recording studio, and a basketball court.

Details of his raucous lifestyle started to come out after a disgruntled employee filed a lawsuit against him alleging he patronized prostitutes and drug dealers.

In a somewhat prophetic proclamation, Nicholas proudly said in a 2004 interview with the Orange County Weekly that he was "a media relations nightmare."

I think it's fair to say after this latest news, he's the epitome of a PR nightmare.

 

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