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Henry T. Nicholas III: A human tragedy

Henry Nicholas, the flamboyant founder and former CEO of Broadcom, was indicted on securities fraud, conspiracy, and federal narcotics charges on Thursday.

Updated 8:50 a.m. PDT Nov. 16, 2011 to add final paragraph
at 2:50 p.m. PDT to clarify sources.

In case you've been in a sensory deprivation tank for the past few days and missed the news, Henry T. Nicholas III, founder and former chief executive officer of chipmaker Broadcom, was indicted on securities fraud, conspiracy, and federal narcotics charges on Thursday.

Henry T. Nicholas III

One of the indictments was related to options backdating, the cause of a $2.2 billion charge Broadcom took last year. But it was the sex and drug-related indictment that captured the media's attention.

If you read the indictment (PDF), you'll understand why one report said, "You can't make this kind of stuff up,".

Rarely does a billionaire and technology industry legend self-destruct in such dramatic and flamboyant style. But there's more to this human tragedy than meets the eye, and it almost surely extends beyond Nicholas.

Childhood issues

From early childhood, Henry seems to have been plagued with a number of issues that may have led to his bizarre adult behavior.

According to a 2004 interview in OC Weekly, "To me, it has always seemed that things move too slow," Nicholas said. "Nowadays, a kid like me, they'd say he had ADD [Attention Deficit Disorder], but they didn't call it that then. I'm dyslexic, too, but they didn't know that right away, either. I spent six months in the retarded kids' class, and they were the happiest days of my life. I got candy bars for not acting out!"

As if that wasn't enough, Henry's mom later kicked her alcoholic husband out of their Cincinnati home, grabbed Henry and his sister, and fled to California, according to the OC Weekly story.

And the Orange County Register reportedthat Nicholas' sister was murdered by an ex-boyfriend in 1983.

I'm no shrink, but you don't have to be Sigmund Freud to see that Nicholas' addictive and self-destructive tendencies may be the result of childhood trauma and psychological issues.

The real tragedy, however, is that the problems don't end with Nicholas. His three young children will likely be affected, just as Nicholas must have been by his own childhood chaos.

Family issues

Long before the latest allegations came to light, Nicholas' wife Stacey filed for divorce. Besides years of neglect by her fiercely competitive, workaholic husband, it didn't help that--according to a 2007 L.A. Times story--she allegedly caught him with a prostitute in one of his not-so-secret lairs.

In 2003, Nicholas left Broadcom, ostensibly to try to work things out with his wife. But in light of these latest allegations, he appeared to be in a state of denial regarding the double life he'd been leading.

During the 2004 interview, Nicholas portrayed his post-Broadcom family life like this: "I have a wife and three young children. Ask any good husband and father if that isn't a project big and important enough to fill a life. I'm not bored. My problem when I wake up every morning is figuring out how to squeeze in all the things I want to do that day. If you want to call that a problem, it's the same one I've always had."

According to both the OC Weekly and L.A. Times pieces, three years apart, Nicholas spoke virtually nonstop, jumping from topic to topic, for hours and hours. Was he bored and just enjoying the company? Was he craving the attention? Was he on drugs at the time? Or was that just his personality, ADD and all?

Broadcom issues

How about life at Broadcom? First there's the effect of the $2.2 billion charge on shareholders. Then there's the SEC's fraud charges--also related to the same options backdating Nicholas is accused of--against former CFO William Ruehle, general counsel David Dull, and chairman and CTO Henry Samueli.

And one can't help but wonder what it was like working for Nicholas. According to dozens of reports, he was well-known as a party animal with a mercurial temper. You'd think some of his more raucous alleged behavior would have been visible to employees and executives, perhaps at trade shows, conferences, press tours, or on customer trips.

Were folks constantly forced to cover up for Nicholas? Was the old adage: "What goes on the road, stays on the road" in play? Why didn't anybody blow the whistle? Perhaps they did and the board knew about it. I mean, you'd think Samueli - Nicholas' former professor, Broadcom co-founder, and a member of the board - might have had some clue, right? And that raises corporate governance questions.

Unfortunately, all those questions will likely remain unanswered.

Bottom line

In Walden, the famous writer-philosopher Henry David Thoreau wrote, "The mass of men lead lives of quiet desperation." Well, Nicholas was almost certainly desperate. And the more I study dysfunctional corporate behavior, the more I believe that "the mass of men" applies equally to executives.

But the word "quiet" implies that these unfortunate souls suffer alone. With respect to Henry T. Nicholas III, that simply was not the case. The tragedy affected many, and at least with respect to his children, may continue well beyond this generation.

Update: All charges against Nicholas, Samueli, and Ruehle were ultimately dropped.