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Californian billionaire Henry T. Nicholas III faces drugs, sex and fraud charges PDF Print E-mail
Saturday, 07 June 2008

Times Online

A Californian technology billionaire has been accused of feeding ecstasy to unwitting business associates, hosting orgies at a private drugs warehouse and building a secret party lair under his mansion that even his wife knew nothing about.

The allegations about the extraordinary lifestyle of Henry T. Nicholas III, founder of the chip company Broadcom, came in an indictment unsealed at a California court yesterday.

The 48-year-old businessman was already facing securities fraud and conspiracy charges over an alleged scheme to backdate stock options that forced Broadcom to write down $2.2 billion in profits last year.

But prosecutors also indicted him on a string of drugs charges that apparently came as a surprise both to Mr Nicholas and his lawyers. “It’s a kitchen-sink attack on Dr Nicholas. They’re trying to throw everything at him from eight years ago,” Gregory Craig, his defence lawyer, complained.
Mr Nicholas is worth an estimated $2.3 billion and was listed at 165 on the Forbes rich list last year. He made his money from the manufacture of microchips for mobile phones and broadband internet devices.

The 18-page indictment on drug charges alleges that Mr Nicholas kept four properties in Orange County and Las Vegas, including a warehouse in Laguna Niguel where he stashed and distributed cocaine, crystal meth and ecstasy. He later remodelled the warehouse with private rooms and furnished it with art and high-end electronics.

The court documents also claim that Mr Nicholas hired prostitutes and escorts for himself, his employees and customers and conspired to get illegal prescriptions for drugs such as Valium.

In 2001, according to one count on the indictment, Mr Nicholas smoked so much marijuana during a flight on a private jet between Orange County and Las Vegas that the pilot had to put on an oxygen mask. At a July 1999 Woodstock concert in Rome, New York, he is alleged to have given ecstasy to an unwitting technology executive. He is also accused of having spiked a technology executive’s drink with ecstasy in New Orleans in early 2000.

Mr Nicholas also required his unnamed co-conspirators to provide detailed invoices for drugs they sold to him, and used code names such as “party favours” and “refreshments” to conceal what was being sold, prosecutors claimed.

At a court hearing in Santa Ana, US Magistrate Arthur Nakazato set Mr Nicholas’s bail at a comparatively modest $3.3 million. He also ordered random weapons searches and drug tests by the government, home detention, electronic monitoring and the disabling of his two private planes.

Mr Nicholas, in handcuffs and wearing gray slacks and a white shirt with no tie or belt, was reported to have nodded vigorously when asked if he agreed to the conditions of release.

The judge said that he was concerned that Mr Nicholas’s extreme wealth could allow him to flee at any moment and his Newport Coast home, valued at $15 million to $18 million, would be no impediment to flight for “one of the wealthiest men in the world”

Mr Nakazato also said he was bothered by government allegations that Mr Nicholas had threatened and hit a grand jury witness last year during an argument on a private jet. He told him: “If you flee, I will detain you and I will order an arrest warrant and I’ll have the marshals and the FBI going on a hunt for you – and when they bring you back, I’m not going to show much mercy.”

An arraignment hearing was set for June 16 and Mr Nicholas did not enter a plea.

Also indicted on the stock-option backdating was William J Ruehle, Broadcom’s former chief financial officer. Mr Ruehle, 66, was released on $2.6 million bail and surrendered his passport, although he will be allowed to take three international trips that were already planned.

The drugs charges faced by Mr Nicholas carry a maximum combined sentence of 20 years in prison, although he could face a theoretical 340 years in prison on the fraud and conspiracy charges.

Backdating stock options, which often are granted as hiring and retention incentives for executives, is legal but companies have run into trouble by failing to account for the true cost of the exercise, thereby inflating their income and stock price.

Mr Nicholas served as CEO and president of Broadcom from its inception in 1991 until his resignation in 2003.

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