- The Washington Times - Friday, June 6, 2008

SANTA ANA, Calif. - Broadcom Corp. co-founder Henry T. Nicholas III was in custody Thursday on charges that he slipped Ecstasy into the drinks of technology executives, maintained a warehouse to store cocaine and tried to conceal his illegal conduct with bribes and death threats.

The billionaire also is accused of committing conspiracy, securities fraud and other violations while he led the Irvine, Calif., computer-chip company.

A pair of indictments unsealed Thursday, one addressing the drug charges and the other allegations related to improper handling of backdated stock options, paint a bizarre picture. Mr. Nicholas, a successful entrepreneur, is accused of using much of his fortune to fund drug parties in airplanes and luxury homes and to build a secret tunnel and room beneath his mansion in Laguna Hills.

Much of that purportedly happened at the same time as the backdating scheme, which forced Broadcom to write down its profits by $2.2 billion in January 2007. That is believed to be the largest accounting restatement related to improperly accounting for backdated options.

Broadcom’s former chief financial officer, William J. Ruehle, also was named in the backdating indictment and faces conspiracy, securities fraud and other charges. He is not charged with drug violations.

“It is critical to maintain the transparency of our financial markets, something that these defendants allegedly attempted to manipulate through the scheme, which created a false picture of Broadcom’s finances,” said U.S. Attorney Thomas P. O’Brien said.

The 18-page indictment on drug charges says that Mr. Nicholas kept four properties in Orange County and Las Vegas, including a warehouse in Laguna Niguel, Calif., where he stashed and distributed cocaine, methamphetamine and Ecstasy.

He later remodeled the warehouse with private rooms and furnished it with art and high-end electronics.

The court documents also contend Mr. Nicholas hired prostitutes and escorts for himself, his employees and customers and conspired to get illegal prescriptions for drugs such as Valium.

In 2001, Mr. Nicholas smoked so much marijuana during a flight on a private jet between Orange County and Las Vegas that the pilot had to put on an oxygen mask, the indictment states.

The allegations recall two earlier civil lawsuits filed against Mr. Nicholas that accused him of rampant drug use and hiring prostitutes. Both lawsuits were cited by prosecutors in a motion filed Thursday that sought to deny bail for Mr. Nicholas.

He faces a total of 21 counts in both federal indictments filed this week, while Mr. Ruehle faces 21 counts in the stock-options indictment.

Broadcom, which makes microchips for cell phones and broadband Internet devices, reported a strong first-quarter profit in April and forecast second-quarter sales of $1.08 billion to $1.13 billion, ahead of Wall Street expectations.

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