Nicholas pleads not guilty to stock fraud, drug charges
Henry T. Nicholas III, the billionaire co-founder of Broadcom Corp., pleaded not guilty in Santa Ana on Monday to 21 federal fraud and conspiracy counts accusing him of manipulating stock options to secretly reward employees of the Irvine microchip designer.
Nicholas, 48, also answered to a separate four-count indictment accusing him of furnishing drugs to colleagues and associates and secretly spiking customers’ drinks with Ecstasy.
“Not guilty,” he said in a firm voice, facing U.S. Magistrate Judge Robert N. Block. Assistant U.S. Atty. Andrew Stolper, one of the prosecutors, said the cases would be assigned to U.S. District Judge Cormac J. Carney in Santa Ana.
Nicholas, who is free on $3.3-million bond, was flanked by lawyers, advisors and a girlfriend as he sat in back of the court in a three-piece suit until he was called to be arraigned. It was a contrast with the events of June 5, when he surrendered to the FBI and sat at a bail hearing in the same courtroom wearing an open-collared shirt with unbuttoned sleeves hanging over his handcuffs.
Former Broadcom Chief Financial Officer William J. Ruehle, 66, who is free on $2.6-million bond, also pleaded not guilty to stock option violations. Among other things, Ruehle is accused of getting improperly backdated options -- a charge not filed against Nicholas. Attorneys for the two men declined to comment.
The options indictment, which lists Broadcom co-founder and Anaheim Ducks owner Henry Samueli as an unindicted co-conspirator, alleges a conspiracy to backdate stock options to make them more valuable to employees without having to report the expense to shareholders.
To correct its books, Broadcom last year recorded $2.2 billion in previously unreported expenses, the biggest such adjustment among more than 200 firms whose options practices have come under scrutiny.
The second indictment accuses Nicholas of doling out drugs to cohorts as a business practice and of maintaining stashes of cocaine, methamphetamine and other drugs.
On one occasion, the indictment alleged, the pilot of his private jet had to put on an oxygen mask as the cockpit filled with smoke from the marijuana fired up by Nicholas and associates.
Last month, the Securities and Exchange Commission filed a civil lawsuit accusing Ruehle, Nicholas, Samueli and former Broadcom General Counsel David Dull with falsifying the company’s reported income by backdating options.
Nicholas served as chief executive and president of Broadcom from its inception in 1991 until he resigned in 2003. Ruehle joined the company in 1997 to lead its highly successful initial public offering. He retired in 2006, when Broadcom’s internal investigation of its stock option awards implicated him and Nicholas in wrongdoing.
The company exonerated Samueli, who was Broadcom’s chairman and chief technology officer. When the SEC case was filed, Samueli stepped down, although he remains in an advisory role, the company said.
--
