Pubdate: Fri, 6 Jun 2008
Source: New York Times (NY)
Page: 5, Section C
Copyright: 2008 The New York Times Company
Author: Laura M. Holson


Henry T. Nicholas III, the flamboyant co-founder and former chief
executive of the chip maker Broadcom, was indicted Thursday in
California on fraud, conspiracy and drug charges, including
allegations that he spiked the drinks of other executives with ecstasy.

One indictment said he also maintained several residences that were
used to distribute and sell drugs, including cocaine and
methamphetamine, and threatened to kill people if they talked about
his activities.

A second indictment filed in the Federal District Court in Santa Ana,
Calif., and also unsealed Thursday, charged Mr. Nicholas and William
Ruehle, the former chief financial officer of Broadcom, of improperly
backdating stock options, forcing Broadcom to take a $2.2 billion write-down.

Lawyers for both men said they were innocent of all

Mr. Nicholas, 48, is a colorful character who, along with his former
college professor, Henry Samueli, became a billionaire when he smartly
timed the industry's need for silicon chips that send voice and data
over cable lines.

Mr. Nicholas turned himself in to the F.B.I. on Thursday morning and
appeared in federal court in Santa Ana Thursday afternoon. A federal
magistrate, Arthur Nakazato, ordered both Mr. Nicholas and Mr. Ruehle
released, said a spokesman for the United States attorney's office.

Bond was set at $3.4 million for Mr. Nicholas, and he will be subject
to home detention and required to complete a rehab program. Mr.
Ruehle's bond was set at $2.6 million.

Mr. Nicholas's lawyer, Brendan V. Sullivan Jr., declined to comment on
the indictment, but said in a statement: "Dr. Nicholas will contest
these charges vigorously. He is confident that he will be fully

In his early days running Broadcom at the height of the dot-com boom
in the mid-1990s, Mr. Nicholas was nicknamed Darth Vader by rivals
because he was so competitive. He was known for his outlandish stunts
and spectacular outbursts.

In one incident described in the indictment, Mr. Nicholas and his
guests are said to have inhaled so much marijuana on a flight to Las
Vegas from Orange County, Calif., that clouds of smoke and fumes
drifted into the cockpit of the private plane and the pilot was
required to put on an oxygen mask.

Mr. Nicholas is also accused of hiring prostitutes not only for
himself but also for customers and associates of Broadcom, and to have
supplied them with drugs. And, according to the indictment, Mr.
Nicholas "used threats of violence and death and payments of money to
attempt to conceal his unlawful conduct."

In one 2002 incident cited in the indictment, Mr. Nicholas is
described as entering into a $1 million settlement agreement "with a
Broadcom employee who had knowledge" of his boss's drug activities.

Mr. Nicholas used several residences in Orange County and Las Vegas,
as well as a commercial office space called the "warehouse," to
distribute and use drugs, according to the unsealed indictments.
Various code words, including "supplies," "party favors" and
"refreshments," were used to describe the various drugs, the
indictment said. But ecstasy is described as a particular favorite.
According to the indictment, Mr. Nicholas gave some to an executive
without his knowledge in July 1999 at the Woodstock concert in Rome,

In January 2003, Mr. Nicholas resigned from the company that he
co-founded and that made him a billionaire many times over. He said he
was going to focus on salvaging his marriage after his wife, Stacey,
filed for divorce.

Mr. Ruehle, who faces conspiracy and securities fraud charges, is not
charged with drug violations.

In the backdating indictment, the federal government said it was done
to reward Broadcom employees, including Mr. Ruehle. It said that Mr.
Nicholas concealed the backdating by signing false documents that
stated the options had been approved as of earlier dates.

"Bill Ruehle is innocent of the charges in the indictment and he looks
forward to the opportunity to clear his good name in a court of law,"
Richard Marmaro, Mr. Ruehle's lawyer, said in a statement. "Bill is a
man of the highest integrity, and his reputation in the financial
community has always been impeccable. At all times, Bill acted in good
faith and believed Broadcom's financial statements were accurate."

Mr. Marmaro added: "Broadcom was by no means the only company to make
this accounting mistake. At last count, nearly 250 companies have
acknowledged internal stock options investigations, and approximately
130 of these companies have announced restatements relating to
mistakes in their options accounting." 
- ---
MAP posted-by: Richard Lake