A federal probe into backdating of stock options at Irvine’s Broadcom Corp. has shifted to cofounder and former chief executive Henry Nicholas and his personal life while at the chipmaker, the Wall Street Journal reported Friday.
The options probe is being led by the U.S. Attorney’s office in Orange County, which has broadened its investigation to include a lawsuit against Nicholas by a former bodyguard and personal assistant, according to the Journal.
The suit, filed earlier this year in Los Angeles by Kenji Kato, charges Nicholas with drug use and creating a “hostile workplace,” according to the story.
Federal investigators are said to be interested in the suit as part of “an aggressive legal theory” as to whether Broadcom failed to disclose to investors that Nicholas’s alleged drug use hindered his ability to run the company.
Nicholas hasn’t been charged in the federal probe, which stems from Broadcom’s revised financial statements for 1998 through 2005 with charges of $2.2 billion for stock options that were improperly accounted for.
The restatement bill is the biggest for a company in the options scandal that peaked last year.
A lawyer for Nicholas denied the allegations raised in the Wall Street Journal and questioned why a probe into stock options had veered into charges about Nicholas’s personal life.
The suit’s allegations charge hard drug use and more. Kato’s suit charges that Nicholas would stay up for days at a time, fueled by multiple substances, according to the Journal. His behavior was often “erratic” and he was “regularly confused,” the Journal reports Kato as saying in court filings.
Kato also alleges Nicholas spiked the drinks of clients without their consent and sent prostitutes to his customers to entertain them, according to the story.
Nicholas’s lawyer refutes the charges and calls the suit a case of “extortion.”
Kato originally sought a $9 million payment from Nicholas, the lawyer said. Local authorities are said to be conducting a separate investigation into the alleged extortion.
Earlier this week, FBI agents are reported to have come to Nicholas’s Newport Coast home where he’s been living since separating from wife Stacey. The two plan to divorce. The agents had subpoenas for employees of Nicholas to appear before a grand jury, according to the Journal.
Nicholas stepped down as Broadcom chief executive in 2003. At the time, he and the company said he was leaving to try and fix his failing marriage.
The Business Journal, alone among the media at the time, reported that Nicholas’s “hard-driving lifestyle” and “playboy persona” were part of his departure.
