Comms chips

Henry Nicholas's Undoing

10:30 AM -- Technically, the indictments revealed Thursday didn't make the Henry Nicholas story any weirder. Come on, Nicholas -- a Broadcom Corp. (Nasdaq: BRCM) founder and its former chairman/CEO -- had already been accused of building an underground lair for prostitutes and drug use. The story wasn't going to get much further out than that.

It did widen a bit, though, with the 18-page indictment's accusations of Nicholas using multiple residences and an office space for drug use and/or distribution. Then there's the part about allegedly spiking a customer's drink with Ecstasy -- OK, maybe that does raise the bar a bit.

Nicholas is still respected in chip circles -- maybe not liked, but respected -- and I don't expect that to change. He was annoying at his height of power, but few will dispute he's intelligent and worked wonders with Broadcom during its ascent.

One of Nicholas's admirers put it this way: The money simply ruined him. It was too much, too fast, to a man who already had too big an ego.

His case was the most extreme, but he wasn't alone. Around 2000, a sense of entitlement had built up among tech shareholders; many people felt they had a right to an ever-increasing share price. I'd heard of one investor-relations person who even got death threats over a press release that lowered earnings forecasts. It was all part of the same ugliness blanketing the tech sector.

The drugs and hookers comprise the sexier part of the Nicholas story, but there's plenty of meat on the side of Broadcom's stock-options scandal, too.

It's been pointed out that backdating stock options isn't inherently illegal, and it's been suggested that many an executive did it on bad advice, misunderstanding the law or the implications. But a couple of passages in the grand jury's 65-page indictment against Nicholas and ex-CFO William Ruehle suggest the executives knew exactly what they were doing and how much trouble it would cause if auditor Ernst & Young International knew about it.

I'm hoping to get enough of a break from NXTcomm work to read the indictment more thoroughly.

— Craig Matsumoto, West Coast Editor, Light Reading

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