A big news week for Broadcom, with several wireless chip announcements at the Computex trade show, has been somewhat overshadowed by extraordinary allegations made against its former chief executive.
Henry Nicholas, a co-founder of the chip company and chief executive from 1998 to 2003, was indicted on Thursday on charges of engaging in drugs violations, including spiking an industry executive’s drink with ecstasy. He was also indicted on charges of participating in a stock options backdating scheme, which forced a $2.2bn writedown at Broadcom.
William Ruehle, Broadcom’s former chief financial officer, was also named in the stock-option indictment.
The prosecutions are being pursued by the US Attorney’s office following an FBI investigation. Mr Nicholas, 48, has surrendered to special agents.
The stock-options indictment is unsurprising – the Securities and Exchange Commission had already charged Mr Nicholas with accounting irregularities. The drugs indictment is something of a shocker in its detail.
Over a nine-year period, Mr Nicholas is alleged to have obtained and distributed ecstasy, cocaine and methamphetamine – also known as crystal meth – in a warehouse, homes in California and a a condominium in Las Vegas.
It alleges he used ecstasy to spike drinks at parties, and supplied drugs to prostitutes and escorts he had hired.
His drug-taking also took flight, according to the allegation in “Overt Act No. 50″ on the indictment:
“In or around 2001, defendant Nicholas distributed and used controlled substances during a flight on a private plane between Orange County, California and Las Vegas, Nevada, causing marijuana smoke and fumes to enter the cockpit and requiring the pilot flying the plane to put on an oxygen mask.”
Elsewhere, it alleges he spiked the drinks of others with ecstasy without their knowledge, including “the drinks of technology executives and representatives who worked for Broadcom’s customers.”
The four charges in the narcotics indictment carry a statutory maximum penalty of 20 years in jail. The combined stock-option backdating charges add up to a maximum possible sentence of 340 years for Mr Nicholas and 370 years for Mr Ruehle.
Mr Ruehle’s lawyer said his client was innocent of the charges, while Mr Nicholas’s was not immediately available for comment.
