SANTA ANA, CALIF. (CN) – Broadcom’s former CEO and CFO face federal charges of cheating the company of $2.2 billion by backdating stock options. In a separate indictment, prosecutors accuse former CEO Henry Nicholas of spiking executives’ drinks with Ecstasy, and distributing the drug as “party favors.” Nicholas and his guests allegedly smoked so much marijuana on a private plane that the pilot had to wear an oxygen mask.
The first indictment claims that Nicholas, CFO William Ruehle and others ran a scheme from 1999 to 2005 to “fraudulently backdate millions of stock option grants, fail to record stock-based compensation expenses, and falsify documents to further the fraud.” Because of the scheme, Broadcom had to restate its financial results for 2007 to reflect $2.2 billion in additional expenses, the complaint states. It claims that Nicholas sold more than $1 billion of his Broadcom stock, “during the time period of the fraudulent scheme.”
Nicholas and Ruehle also are charged with filing false documents with the SEC.
Broadcom’s former executive vice president for human resources, Nancy Tubbs, has pleaded guilty to charges of obstructing justice, the U.S. Attorney’s Office said.
The drug indictment charges Nicholas alone. Prosecutors say Nicholas kept several “drug-involved” properties, including two homes, a warehouse and a condo, where he distributed drugs to prostitutes he hired, and to others. In one incident, the indictment claims that Nicholas and his guests smoked so much marijuana on a private plane that the pilot had to wear an oxygen mask for protection from smoke that entered the cockpit.
Nicholas and Ruehle are charged with conspiracy, securities fraud, false certification of financial reports, lying to accountants, false statements in SEC reports, falsification of corporate books and records, and honest services mail and wire fraud.
If convicted of all charges, Nicholas faces up to 340 years in prison; Ruehle could get 370 years.