DRUGS GRAB SPOTLIGHT IN BROADCOM CASE

Federal fraud charges unsealed Thursday against former Broadcom Corp.
Chief Executive Henry T. Nicholas III for allegedly backdating stock
options were overshadowed by a second federal indictment accusing the
executive of distributing drugs and slipping them in business
associates' drinks. The criminal charges are a major blow to Mr.
Nicholas, a prominent Southern California technology executive who
co-founded Broadcom, a maker of specialized computer chips based in
Irvine, Calif.

Reached Thursday, John Spiegel, a lawyer for Mr. Nicholas, wouldn't
comment on the case. Mr. Nicholas left Broadcom in 2003.

A 21-count indictment unsealed Thursday focuses on Mr. Nicholas's
alleged role in options backdating at Broadcom. In it, prosecutors
included excerpts of many emails in which Mr. Nicholas and other top
executives allegedly discussed and coordinated the improper practice.

Prosecutors also allege that in 2000 an attorney for a fired former
executive threatened to expose the backdating, but that Mr. Nicholas
covered up the matter by arranging a settlement with the executive
valued at $7 million. William J. Ruehle, Broadcom's former chief
financial officer, also was charged in the criminal backdating
complaint, which was filed in U.S. District Court in Santa Ana, Calif.

In a separate four-count indictment against Mr. Nicholas alone,
prosecutors allege that the former Broadcom chief engaged in a
pattern of drug use and abuse over a nearly seven-year period. The
charges against him include conspiracy to distribute Ecstasy, cocaine
and methamphetamine. Among the more sensational charges is that Mr.
Nicholas spiked the drinks of Broadcom customers and others with
drugs without their knowledge. Although the indictment doesn't
identify any such persons by name, it cites an early 2000 incident in
New Orleans at which the Broadcom chief allegedly used Ecstasy, also
known as MDMA, to spike the drink of a "technology executive."
Prosecutors also allege that Mr. Nicholas in 2001 directed a Broadcom
employee to pay a drug courier between $5,000 and $10,000 in cash in
the lobby of Broadcom's headquarters. The same year, they say,
marijuana smoke aboard Mr. Nicholas's private plane was so thick
during a trip to Las Vegas that the pilot had to put on an oxygen mask.

In 2002, the indictment alleges, Mr. Nicholas had Broadcom pay $1
million to a former employee and his attorney in a settlement that
contractually prevented the former employee from "speaking about
defendant Nicholas's unlawful narcotics activities."

Federal prosecutors began investigating allegations of drug use by
Mr. Nicholas last year, after a former personal assistant, Kenji
Kato, sued Mr. Nicholas for back wages and accused him of hiring
prostitutes and spending large sums on drugs. Mr. Kato's lawyer said
Thursday the case is pending. Many of the specific drug-related
allegations in the criminal indictment closely mirror charges in Mr.
Kato's civil complaint. Carl Tobias, a law professor at the
University of Richmond who tracks white-collar cases, said he was
surprised that prosecutors would bother with the drug allegations in
a corporate-fraud probe. "It strikes me that it unnecessarily
complicates it," he said. "I don't see what it adds to the pretty
strong indictment about business practices."

Prof. Tobias said prosecutors may be trying to gain leverage against
Mr. Nicholas to force him into a plea deal. Andrew Stolper, a
prosecutor on the case, declined to comment.

Last month, the Securities and Exchange Commission filed civil
charges related to backdating against four current or former Broadcom
executives. Those charged included Messrs. Nicholas and Ruehle, as
well as David Dull, the company's former general counsel, and Henry
Samueli, another co-founder. Following the SEC charges, Mr. Samueli
stepped down as Broadcom's chairman and took a leave of absence as
the company's chief technology officer. Federal prosecutors based in
Santa Ana spent more than a year investigating Mr. Samueli's
potential involvement in the case. Under the initials H.S., Mr.
Samueli was referred to as an unindicted co-conspirator in Thursday's
criminal backdating indictment. People familiar with the case said
Mr. Samueli has discussed a potential resolution to the criminal
matter with prosecutors. His lawyers didn't return calls seeking
comment. Richard Marmaro, an attorney for Mr. Ruehle, said in a
statement that his client was "innocent of the charges in the
indictment," adding that Mr. Ruehle always acted in good faith and
believed Broadcom's financial statements were accurate. He called the
indictments a "classic case of government overreaching."

Stock options give the recipient the right to purchase shares of a
company's stock in the future, typically at the price of the stock on
the date they were granted. Backdating involves retroactively picking
a favorable date on which to pretend the options were granted, thus
giving the recipient an instant paper profit.

Companies that engaged in backdating generally hid the practice and
failed to record the corporate expense involved in awarding
in-the-money options. Scores of companies have been caught up in a
broad federal investigation of the practice.

Thursday's indictments bring the total of those charged criminally in
the broader backdating scandal to 22. Nancy Tullos, a former Broadcom
human-resources executive, previously pleaded guilty to
backdating-related charges. Last year, Broadcom restated years of its
financial results and recorded $2.2 billion in extra
backdating-related expenses it should have taken originally.