Initiative sponsor in spotlight

The principal financial backer of a proposed state ballot measure to step up the fight against crime in California is under investigation by federal prosecutors, who are looking into possible stock manipulation.

Henry T. Nicholas III, an Orange County billionaire who contributed $1 million as the sponsor of the Committee to Take Back Our Neighborhoods, has also been accused in civil litigation of using illegal drugs and paying for prostitutes.

The committee was set up to support the effort to put a measure on the November 2008 ballot that would target gang crime with tougher sentences and more aggressive prosecution.

Some advocates for crime victims worry that Nicholas’ role as the sponsor of the initiative could undermine its credibility.

“I don’t think it will do any good for the initiative,” said Joe Klaas, head of the group Citizens Against Violent Crime. “I would think that would not be a valid thing for him to comment on, given his own legal issues.”

Nicholas, the former chief executive of Broadcom Corp., has denied any criminal wrongdoing and said in an interview that he has a sincere and personal reason to be involved in the initiative to reduce crime: the 1983 murder of his 21-year-old sister, Marsy, by her ex-boyfriend.

After that slaying, Nicholas and his mother founded a group that counsels homicide victims’ families.

“I’m very passionate about it,” he said of the possible initiative. “The neighborhood I live in is safe, but other people aren’t so fortunate. What hopefully this initiative will do is maybe we will have less people from disadvantaged neighborhoods that we will have to go through the tough job of consoling.”

The proposed measure was announced in October by state Sen. George Runner (R-Lancaster) and his wife, Assemblywoman Sharon Runner (R-Lancaster), who said it would ensure that nearly $1 billion in state funds would be dedicated to gang enforcement and intervention.

The Runners have submitted it to the state attorney general for approval, which is needed before backers can collect signatures to qualify it for the ballot.

The measure, which is also backed by Los Angeles County Sheriff Lee Baca, would increase by 10 years the sentence given convicted felons caught with guns; increase penalties for people who provide contraband to gang members in prison, and prohibit bail for illegal immigrants charged with violent gang crimes.

George Runner said he had no qualms about accepting Nicholas’ money.

“We are glad to have his contribution. Dr. Nicholas has a very personal story of tragedy,” Runner said. “The other issues are totally outside of that. There are some accusations, but nobody’s been convicted.”

Nicholas was a founder of Broadcom Corp., an Irvine technology firm. He is being investigated by the U.S. attorney’s office as it looks into allegations that stock options were improperly backdated in secret to benefit employees.

The backdating of stock options can boost stock gains for insiders at the expense of shareholders.

An internal investigation by Broadcom found that Nicholas bore “significant responsibility” for the backdating of stock options to make them more valuable, according to a report released in January.

But an attorney for Nicholas said at the time that Broadcom’s audit committee found that Nicholas did not benefit personally from any alleged backdating of options that occurred before he left the computer chip-making firm in 2003.

Separately, Nicholas was sued last year by Kenji Kato, a former assistant who alleged that he was owed $150,000 in back wages and that Nicholas allegedly required him to oversee supplies of cocaine and other drugs, pay prostitutes from a petty cash fund and conceal these activities from Nicholas’ wife.

That lawsuit is still pending, Kato’s attorney said last week.

Those allegations are also being looked at by federal authorities as part of the probe into past management irregularities at Broadcom.

Nicholas declined to comment on the specific allegations and federal investigation, but he disputed that any allegations would affect the ballot measure.

“The fact that I’m supporting it, I don’t see why it would be an issue,” Nicholas said. “The law should succeed or fail on its own merits.”

Nicholas contributed $1 million to the ballot measure committee Dec. 10.

The committee’s only other contribution is $35,000 from the California Assn. of Health Underwriters Political Action Committee.

Nicholas’ involvement is seen by some as relevant.

“There is an incredible and devastating effect that his support will have on this measure,” said Everett Hodges, board chairman of the Violence Research Foundation in Orange County. “He is doing a great injustice to those supporting it.”

Nicholas has been a major financial contributor to tough-on-crime measures in the past, including the law passed by voters last year in California that bans certain sex offenders from living near schools and parks.

He also contributed $1.7 million to the campaign to defeat a 2004 state ballot measure that would have relaxed some provisions of the state’s three-strikes law.

He has also contributed more than $1.5 million to Gov. Arnold Schwarzenegger’s campaign committees, $11,000 in political funds to Atty. Gen. Jerry Brown and $1,000 to Los Angeles County Dist. Atty. Steve Cooley.

patrick.mcgreevy@latimes.com