Business

Broadcom ex-chief pleads not guilty

Broadcom co-founder and former chief executive Henry Nicholas pleaded not guilty to charges he spiked customers' drinks with ecstasy and helped orchestrate improper stock-options backdating.

Nicholas, 48, and Broadcom's former chief financial officer, William Ruehle, 66 – also charged in the backdating scheme – entered not guilty pleas Monday in federal court in Santa Ana, Calif. Nicholas will be tried separately on the drug and the backdating allegations.

Nicholas, who stepped down as CEO of the Irvine, Calif.-based chipmaker in 2003, was indicted June 5. He and Ruehle are charged with securities fraud in an alleged scheme that caused Broadcom to restate 1998 to 2005 earnings by $2.22 billion.

The narcotics indictment charged Nicholas with spiking the drinks of technology executives and representatives of Broadcom customers. He also supplied drugs to prostitutes he hired for himself and business partners, prosecutors said.

“My boss says I can't,” Nicholas said Monday when asked for comment after the hearing, referring to his attorney.

Nicholas's lawyer, James Riddet, and Ruehle's lawyer, Richard Marmaro, declined to comment.

U.S. Magistrate Judge Robert Block set provisional trial dates for July 29 for both the narcotics and the backdating case. Nicholas is free on a $3.4 million bond in the form of real estate assets of friends and family. He's staying at a drug rehabilitation facility in Malibu, Calif., according to court filings.

Nancy Tullos, Broadcom's former vice president for human resources, last year pleaded guilty in the backdating investigation and agreed to cooperate with prosecutors.

The U.S. Securities and Exchange Commission last month sued Nicholas and Henry Samueli, who started the company with Nicholas, claiming they orchestrated a scheme to illegally backdate stock options from 1998 to 2005. Samueli resigned as chairman after the SEC sued. Broadcom in April agreed to pay $12 million to settle with the SEC.

Through backdating, companies retroactively change grant dates to periods when share prices were lower, boosting recipients' profits while potentially distorting earnings. At least 225 companies have disclosed internal or federal investigations involving options irregularities, and more than 140 said they will restate financial results.

Last year Broadcom blamed its accounting problems on Nicholas, Ruehle and Tullos. All three bore responsibility for a “lack of adequate controls” over options grants, the company said at the time.

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