Boardroom Strategies

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Former Chief of Broadcom Is Indicted
By 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 charges.

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 vindicated.”

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, N.Y.

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.”