Federal judge could dismiss drug charges, clear Broadcom ex-CEO in civil cases

Judge could nix charges against Broadcom ex-CEO

SANTA ANA, Calif. — Federal prosecutors who endured a public dressing-down when a judge threw out a high-profile securities fraud case against Broadcom Corp.’s former chief executive officer are bracing for another round of rulings that could wipe the slate clean for a man who once faced decades in prison.

Broadcom co-founder and former CEO Henry Nicholas III will appear in court Thursday to learn if the same federal judge who stunned prosecutors by throwing out the stock option backdating case against him six weeks ago will also allow the government to drop a parallel indictment on felony narcotics charges.

U.S. District Judge Cormac J. Carney will also consider whether to dismiss two civil cases in which the government sought to seize Nicholas’ 1993 Gulfstream jet and properties in Las Vegas and Newport Beach, Calif. Prosecutors had alleged Nicholas stored and distributed ecstasy, cocaine and marijuana to friends and business associates from the properties and maintained a “drug warehouse” in Laguna Niguel.

The series of motions, as well as a bid by another former Broadcom executive to wipe away her guilty plea, could be a death knell for the government in its headline-grabbing investigation into possible wrongdoing by Nicholas and other executives at the Irvine, Calif.-based company.

Nicholas has declined to comment on the developments, as have his attorneys.

Prosecutors have also declined to comment, but filed paperwork earlier this month indicating they intend to appeal the dismissal of the securities case.

The judge showed his displeasure with the government at a Dec. 15 hearing during which he lashed out at prosecutors for misconduct and a lack of evidence.

At the hearing, Carney dismissed stock-option backdating charges against Nicholas and former Broadcom chief financial officer William Ruehle just two days before a jury was to begin deliberating in Ruehle’s case. Carney made the decision to dismiss just days after hearing evidence from Broadcom co-founder Henry Samueli, who testified for his former colleague Ruehle under a rare grant of immunity.

Samueli himself had earlier pleaded guilty to a single felony count of lying to Securities and Exchange Commission investigators — a plea that Carney also voided after hearing his testimony.

At the Dec. 15 hearing, Carney said evidence in the securities case shows prosecutors tried to influence the testimony of three key witnesses, improperly contacted witnesses’ attorneys and leaked information about grand jury proceedings to the media.

The judge then threw out the backdating case against Nicholas because he said Nicholas would need the same witnesses and could not receive a fair trial.

At the time, Carney also asked prosecutors to show cause as to why the narcotics case against Nicholas should not be thrown out — and the government moved to drop the charges earlier this month.

Carney must approve that motion at the hearing Thursday.

Nicholas and Henry Samueli started Broadcom in 1991 and took it public in 1998. The Irvine, Calif., company grew to 7,000 employees worldwide and is a leading manufacturer for the chips used in everything from cable boxes to cell phones. It had nearly $5 billion in revenue last year.

Backdating involves retroactively setting a stock option’s exercise price to a low point in the stock’s value, boosting profits when the shares are sold. It is legal when properly accounted for, but if not properly disclosed it can allow companies to overstate profits and underpay taxes.

Broadcom was ultimately forced to write down $2.2 billion in profits after its actions were uncovered.