Henry T. Nicholas III

Henry T. Nicholas III

On June 5, 2008, Broadcom co-founder and former CEO Henry Nicholas III was indicted on charges of illegal stock-option backdating and of violations of federal narcotics laws. On July 14, 2006, Broadcom announced it had to subtract $750,000,000 from earnings due to stock options irregularities. On September 8, 2006 the amount was doubled to $1.5 billion. The company may also owe additional taxes. On January 24, 2007, it announced a restatement of its financial results from 1998 to 2003 that totaled $2.24 billion. On May 15, 2008, Samueli, Broadcom CTO, resigned as chairman of the board and took of a leave of absence as Chief Technology Officer after being named in a civil complaint by the SEC. Mr. Nicholas and William Ruehle, the former chief financial officer of Broadcom, were charged of improperly backdating stock options, forcing Broadcom to take a $2.2 billion write-down.

Besides, Henry Nicholas III 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. 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 was 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.”

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.