A second indictment accused Nicholas of manipulating stock options at Broadcom, the Irvine-based maker of computer chips used in such products as mobile phones, Apple Inc.’s i Pod and Nintendo Co.’s Wii consoles.
The indictment, issued under seal a day earlier, accused Nicholas of doling out drugs and prostitutes as part of a freewheeling lifestyle.
Nicholas III, Broadcom’s co-founder and former chief executive, surrendered to federal agents this morning, said U. Ex-Broadcom CEO Henry Nicholas is accused of stock fraud and supplying drugs. Scott Reckard and Kim Christensen, Los Angeles Times Staff Writers June 6, 2008 Somewhere in the skies between Orange Countyand Las Vegas, federal prosecutors say, Broadcom Corp. Nicholas III gave new meaning to the term “highflying.” Winging their way to Sin City in 2001, Nicholas and his entourage generated so much marijuana smoke that it billowed into the cockpit, “requiring the pilot flying the plane to put on an oxygen mask,” according to a federal grand jury indictment made public Thursday.
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The Securities and Exchange Commission last month accused Samueli and Nicholas of backdating stock options to make them more valuable, leading Samueli to step aside as Broadcom’s chairman pending resolution of the case. “He is confident that he will be fully vindicated.” Ruehle’s lawyer, Richard Marmaro of Los Angeles, said Ruehle “looks forward to the opportunity to clear his good name in a court of law.” Under close watch At an afternoon hearing in U. District Court in Santa Ana, Nicholas sat quietly in a jury box with criminal defendants from other cases, the unbuttoned sleeves of his dress shirt pulled over his handcuffs. Magistrate Judge Arthur Nakazato ordered Nicholas freed on bail of $3.4 million secured by property pledged by his mother, who was in court Thursday, and a group of friends.
Samueli, who also owns the National Hockey League’s Anaheim Ducks, has denied any wrongdoing. He occasionally scowled as his lawyers and prosecutors argued over whether he should be held without bail as a flight risk and a threat to the community. Nakazato ordered that Nicholas be confined to a Malibu drug treatment facility, with electronic monitoring, and that his two private planes be disabled.
Nicholas, who stepped down as Broadcom’s chief executive in 2003, surrendered Thursday morning to the FBI. Ruehle, 66, Broadcom’s former chief financial officer, were accused of backdating millions of stock options for five years to improperly reward employees. Nicholas will contest these charges vigorously,” his lead attorney, Brendan V. He warned Nicholas that he would be arrested if he violated any terms of his release, which also stipulate random drug tests.
A second, four-count indictment names only Nicholas, 48, and alleges that he maintained homes and commercial properties in Orange County and Las Vegas for the “purpose of using and distributing controlled substances,” including cocaine and methamphetamine. He and Ruehle, who also appeared in court Thursday and was freed on a $2-million bond, are to be arraigned June 16.
Among other things, Nicholas allegedly supplied Broadcom customers with prostitutes and narcotics he sometimes referred to as “party favors.” He is accused of slipping drugs into some of their drinks. the drinks of technology executives and representatives who worked for Broadcom’s customers,” the indictment alleged. The indictment that names both men details a conspiracy to backdate stock options to make them worth more to employees without having to report the expense to shareholders.
“Defendant Nicholas spiked the drinks of others with MDMA (ecstasy) without their knowledge, including . An expensive fix To correct its books, Broadcom last year recorded .2 billion in previously unreported expenses — the biggest such adjustment among the more than 200 firms whose options practices have come under scrutiny. discovered that the grant date had been recorded as May 28, which diminished their value.
“By fraudulently backdating and repricing option grants, defendants and their co-conspirators deceived Broadcom’s shareholders, potential shareholders and auditors as to the nature and amount Broadcom truly was compensating its employees and officers,” the indictment alleged. that the 120,000 options he was to get would be backdated to May 25 of that year, increasing their value. He demanded that the date be changed to the more favorable one he’d agreed upon with Nicholas.
Stock options were routinely used to recruit or retain employees during the high-tech boom of the late 1990s. After internal discussion that involved Ruehle and others, Nicholas and Samueli in July 1999 “signed Broadcom corporate records fraudulently reflecting” the earlier date, the indictment alleges.
The indictment details one such arrangement, when Nicholas in June 1999 hired an engineer identified in the indictment by his initials, M. It was a move that would come back to bite them, according to the indictment.
After Broadcom terminated the engineer — and his stock options — in October 2000, his attorney presented Nicholas and Ruehle with a draft of a lawsuit that would have exposed the illegal backdating if made public, prosecutors say.
Nicholas met the engineer at an Orange County hotel, “pleaded with M. not to come forward with his allegations” and cut a deal to vest 85% of the options that had been canceled if he would keep the matter quiet.