Broadcom Co-Founder Faces Drug, Fraud Charges

Broadcom co-founder Henry T. Nicholas III was indicted Thursday on fraud, conspiracy and drug charges—including allegations he spiked the drinks of technology executives and customer representatives with ecstasy and maintained a warehouse for ecstasy, cocaine and methamphetamine.

The charges were contained in two indictments unsealed by federal authorities.

Henry Nicholas III
Henry Nicholas III

One details the drug accusations and the other charges Nicholas with violations related to improperly accounting for backdating stock options while he led the computer and cell phone chip maker.

That indictment also names Broadcom's former chief financial officer, William J. Ruehle, who faces conspiracy, securities fraud and other charges. He is not charged with drug violations.

Thom Mrozek, spokesman for the U.S. Attorney's office, said Nicholas was in custody after turning himself in to FBI agents in Santa Ana.

Nicholas and Ruehle were scheduled to appear in court later Thursday.

Nicholas faces a total of 21 counts on both indictments. The drug indictment charges Nicholas with conspiracy to distribute and acquire controlled substances but provides few details.

His attorney, Brendan V. Sullivan Jr., declined to comment. Last month, attorney Bill Hake said Nicholas had entered an alcohol rehabilitation program.

Ruehle faces 21 counts on the stock options indictment, including allegations of false certification of financial reports, filing false statements with the U.S. Securities and Exchange Commission and wire fraud.

The name of Ruehle's attorney could not be immediately determined.

Last month, securities regulators charged Ruehle, Nicholas, Broadcom co-founder Henry Samueli and Broadcom general counsel David Dull in a civil suit with falsifying the company's reported income, leading to what is believed to be the largest-ever accounting restatement related to backdating stock options.

The SEC said Broadcom had to restate its financial results in January 2007 because of the scheme and reported more than $2 billion in compensation expenses it hadn't accounted for.

Nicholas, 48, served as CEO and president from Broadcom's inception until he resigned in 2003. Ruehle, 65, joined the company in 1997 as vice president and chief financial officer and retired in 2006.

Samueli stepped down as chairman of the company's board of directors and planned to take a leave of absence as chief technology officer, according to a May statement from the Irvine-based company.