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Drugs, hookers and cranked customers: Ex-Broadcom boss indicted

Private jet hot-boxing and other CEO of the century antics

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More proof arrives today that we should have befriended the folks at Broadcom in the early part of this decade.

Broadcom co-founder and former CEO Henry Nicholas has been indicted on charges unsealed today of illegal stock-option backdating, which resulted in the largest financial restatement (a write down of $2.2bn in profits) related to the crime in US history — and that's the boring part.

A second indictment unsealed this morning charges Nicholas with maintaining and distributing drugs from his various homes, supplying hired prostitutes with controlled substances, spiking customer and employee drinks with ecstasy, and other surprising drug-related charges.

One incident alleges Nicholas and others smoked so much marijuana during a flight on his private plane between Orange County and Las Vegas that the pilot had to put on an oxygen mask.

Meanwhile Michael Dell's team serves us some lousy roast beef sandwiches at press events.

According to the indictment, over a nine-year period, Nicholas used his home in Laguna Hills and Newport Coast, a warehouse in Laguna Niguel, and a condominium in Las Vegas to distribute ecstasy, cocaine and methamphetamine.

Nicholas is also accused of using ecstasy to spike the drinks of industry executives and employees of Broadcom customers. (Although how giving someone a psychoactive drug without them noticing is beyond us — much less how it aides in making a semiconductor sale when a person has a sudden uncontrollable fascination with their zipper.)

We've seen similar allegations in a lawsuit filed last year by former aide Kenji Kato. Evidently the US government has decided there's some substance to his claims.

The federal narcotics charges carry a statutory maximum penalty of 20 years in federal prison.

Nicholas along with former Broadcom CFO William Ruehle have been named in the indictment about the stock-option backdating scheme. Ruehle has not been accused of involvement the drug-related charges.

Los Angeles Assistant Director in Charge of the FBI, Salvador Hernandez stated: "The defendants are accused of deliberately manipulating their company's public filings, and by their failure to remain accountable, contributing to a degree of mistrust in the marketplace."

Both are expected to appear before a US Magistrate judge this afternoon. Nicholas surrendered himself to the FBI this morning, according to the US Attorney's Office. ®

Update

We've obtained a copy of the drugs indictment, and have it available here (PDF warning).

Among the more interesting claims in the indictment are allegations that Nicholas bought a commercial warehouse in Laguna Niguel, California as a party-going hideaway. The filing says Nicholas built and furnished private rooms in the warehouse with art, furniture and electronics, and instructed co-conspirators to maintain a supply of cocaine, ecstasy and meth on the premise.

The filing lists repeated invoices for bulk purchases of drugs, including a January 2001 "ballpark budget" for 225 tablets of ecstasy for a Superbowl party at the warehouse. Usually the invoices (Really? Drug invoices?) used code-words such as "supplies," and "party favors." However, one time an apparently sloppy alleged co-conspirator wrote an invoice for 50 tablets of ecstasy described as "E," which was quickly reworked to say "refreshments."

The indictment also claims Nicholas constructed an underground room and tunnel beneath his Rodeo residence for drug use. It also alleges Nicholas used threats of physical violence, death, and bribed people to conceal his drug use.

A copy of Nicholas' stock-option backdating indictment is also available here (again, PDF warning).

The prosecution claims that Nicholas should be detained until trial due in part to his excessive wealth making him a flight risk and alleged history of threatening witnesses. The filing describes one alleged assault where Nicholas took his longtime friend and former personal attorney on a trip to Oakland on one of his private jets. During the flight, Nicholas is said to have taken his friend to the back of the jet where he accused the man of wearing a wire for the government. Nicholas allegedly told the man he would "chase him to the end of the Earth" if he "screwed him" by cooperating with the government, then struck the man in the face.

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