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Broadcom co-founder and former CEO Henry T. Nicholas III is facing two federal indictments that allege conspiracy and securities fraud related to options backdating, as well as numerous drug violations.

The federal indictments, unsealed on Thursday, include a total of 25 counts against Nicholas. According to an Associated Press report, the charges include conspiracy, securities fraud, false certification of financial reports, filing false statements with the U.S. Securities and Exchange Commission, wire fraud, and conspiracy to distribute and acquire controlled substances.

The indictment also names Broadcom's former chief financial officer, William J. Ruehle, who faces conspiracy, securities fraud, and other charges. He is not charged with drug violations.

The San Francisco Chronicle has reported that Nicholas was in custody after turning himself in to FBI agents in Santa Ana, Calif. Nicholas and Ruehle were scheduled to appear in court later Thursday, the newspaper's Web site said.

Mark Saylor, a spokesman for Nicholas, referred the Associated Press to another spokesman, who said that lawyers for the Broadcom co-founder had no comment.

Last month, the Securities and Exchange Commission charged Nicholas, Henry Samueli, David Dull, and Ruehle in a civil suit, accusing them of fraudulently backdating stock options that resulted in more than $2 billion of restated expenses. In May, Samueli and Dull both went on a leave absence from their roles as CTO and general counsel, respectively. Samueli also stepped down as chairman, according to a company press release.

While the options backdating issue is certainly nothing to sneeze at, the drug allegations are definitely more titillating and, quite frankly, much more bizarre.

Here's a sampling of some of the allegations from the indictment highlighted in a Wall Street Journal law blog:

•  In or around 2001, Nicholas distributed and used controlled substances during a flight on a private plane between Orange County and Law Vegas, causing marijuana smoke and fumes to enter the cockpit and requiring the pilot flying the plane to put on an oxygen mask.

Nicholas, 48, served as CEO and president from Broadcom's inception until he resigned in 2003. A billionaire since the company had gone public in 1998, he had always been a larger-than-life character with a personality that matched his 6-foot-7-inch physique. He was known for his bold and often outrageous predictions for the communications market and for Broadcom in general.

He was also known for his wild parties often thrown at his Orange County mansion that sported several touch-screen, wall-mounted computers, a hidden wooden panel in the study that opened to a secret underground tunnel to a gym, a sports bar, a wine cellar, a recording studio, and a basketball court.

Details of his raucous lifestyle started to come out after a disgruntled employee filed a lawsuit against him alleging he patronized prostitutes and drug dealers.

In a somewhat prophetic proclamation, Nicholas proudly said in a 2004 interview with the Orange County Weekly that he was "a media relations nightmare."

I think it's fair to say after this latest news, he's the epitome of a PR nightmare.

(Credit: Steve Tobak)

Here's the first installment of Train Wreck's first recurring post: Dysfunctional Executive Watch. It'll show up whenever there's enough material. Enjoy the lunacy, and let us know if you've got something to report.

You've got fraud
On Monday, the Securities and Exchange Commission filed civil charges against eight former executives of AOL Time Warner for fraudulently inflating online advertising revenue by more than $1 billion. Four of the executives agreed to pay millions in fines and return ill-gotten gains. Charges against the other four, including former CFO John Michael Kelly, are still pending.

The company had previously agreed to fork over $500 million to settle civil and criminal charges brought by the SEC and the Justice Department. ... Read more

The Securities and Exchange Commission has charged two current and two former key executives of chipmaker Broadcom with backdating stock options.

The SEC announced Wednesday it had filed a federal complaint against Chairman and Chief Technology Officer Henry Samueli and general counsel David Dull, as well as former Chief Executive Officer Henry Nicholas and former Chief Financial Officer William Ruehle. The chipmaker later announced that Samueli and Dull had taken leaves of absence from their positions until the matter is resolved.

Samueli, who co-founded the company, also resigned as chairman of the board. The board appointed director John Major to serve as nonexecutive chairman.

Major said Broadcom would not comment on allegations, but pointed out that the charges were "half a decade to nearly a decade" old.

The SEC charges that, from 1998 to 2003, the four schemed to fraudulently backdate stock-option grants, failing to record billions of dollars of compensation expenses, and falsifying documents to further the fraud. As a result of the scheme, Broadcom restated its financial results in January 2007 and reported more than $2 billion in additional compensation expenses, the SEC said.

Ruehle and Dull each personally benefited from the backdating scheme by receiving and exercising backdated grants that were in-the-money by more than $100,000 for Ruehle and $1.8 million for Dull, the SEC said in a statement.

The move follows Broadcom's agreement last month to pay a civil penalty of $12 million to settle SEC charges that it fraudulently backdated stock options.

After years of providing chips for wireless access points used in homes, Broadcom is turning its attention to the business world.

The chip company is putting together a combination of 802.11n Wi-Fi chips and software to help networking companies build wireless access points for enterprise customers, said Mike Hurlston, vice president and general manager of Broadcom's wireless LAN business. Broadcom has been working with its partners for some time on building enterprise-class 802.11n access points, but is finally ready to announce its entry into this category.

Big companies require a lot more sophistication from their access points, Hurlston said. For example, they need things like load-balancing software to move PCs along to nearby access points if one particular unit starts to get overloaded. To this point, they've mostly avoided the faster 802.11n units because of the delay in formal ratification of the standard, but vendors have been shipping 802.11n products for some time.

Broadcom decided to enter the market now because it saw an opportunity to package the Wi-Fi chips with chips for networking switches, so that device makers have more incentive to buy a broader package of products from the company, Hurlston said.

Qualcomm has likely dodged a bullet that could have halted the import of some of its chips into the United States.

On Friday, the company said a judge recommended putting an end to an investigation conducted by the U.S. International Trade Commission that is looking into complaints filed by handset maker Nokia against Qualcomm.

Nokia, which sells more mobile phones than any other manufacturer in the world, asked the ITC in August to ban imports of phones that included Qualcomm chips that Nokia says infringe on its patents. The patents are related to technology that enhances device performance, lowers manufacturing costs and improves battery life.

Nokia and Qualcomm have been duking it out in the courtroom for several months after the companies failed to renew a licensing agreement that expired in April.

ITC Administrative Law Judge Paul Luckern recommended that the investigation end because the companies are already in arbitration to settle the dispute, Qualcomm said in a statement. The ITC has 30 days to review the decision. If the decision stands, the investigation will be terminated and Qualcomm will continue to be allowed to import its chips into the United States.

The judge's recommendation comes a few months after the ITC ruled that imports of Qualcomm chips that infringe on a patent from Broadcom would be banned from entering the U.S. The ban has been partially stayed while Qualcomm appeals the case. But service providers such as Verizon Wireless, which use Qualcomm chips in many of the cell phones they sell, has made a separate deal with Broadcom to ensure that phones on the Verizon network still make it into the country.

Chipmaker Broadcom said Monday that it has developed a new processor that integrates all key 3G cellular and mobile technologies onto a single chip.

The processor that operates at extremely low powers will enable cell phone makers to build new 3G phones in more compact form factors with very long battery lives at a fraction of what it costs today, the company said.

The new 3G "Phone on a Chip" supports the four next-generation cellular technologies used throughout the world: HSUPA (High-Speed Uplink Packet Access), HSDPA (High-Speed Downlink Packet Access), WCDMA (Wideband Code Division Multiple Access), and EDGE (enhanced data for GSM evolution). It also can transmit and receive FM radio for playing music on a car stereo. And it supports Bluetooth technology and processing capability for a 5-megapixel camera.

Broadcom claims it is at least a year ahead of competitors, such as Texas Instruments and Qualcomm, in terms of integrating so much functionality into a single chip. The company also said the chip is already available to a select group of Broadcom customers.

In 2006, Broadcom had only about 1.4 percent of the cell phone chip market. By contrast, TI and Qualcomm each had about 20 percent of the 2006 mobile phone chip market, according to iSuppli.

The new chip could help boost Broadcom's market share against these competitors, especially in Asia where operators are rolling out faster networks much more quickly than they are here in the U.S. market. Broadcom has been aggressively trying to get a greater share of the cell phone market for the past few years. And as a result, the company has been embroiled in a series of legal fights with rival Qualcomm.

Broadcom won an important battle earlier this year, when the U.S. government banned Qualcomm and its partners from importing devices that use Qualcomm's 3G technology, because part of the technology has been found to infringe on patents held by Broadcom.

This is the seventh in a series of posts from the Hot Chips conference at Stanford University. The previous installments looked at technology and software, process technology, multicore designs, IBM's Power6 efforts, Vernor Vinge's keynote address, and Nvidia. Other CNET coverage may be found here. This is sort of an experiment for me; I usually prefer to have time to review my work before I publish it. If you see anything wrong, please leave a comment!

This session has two presentations--one from SiBeam describing wireless HDTV transmission for home use, the other from Broadcom on new 802.11n Wi-Fi technology.

The SiBeam presentation is easily summarized: It describes a chipset that sends uncompressed HDTV video over ... Read more

Qualcomm said Monday that its top lawyer is leaving the company.

Lou Lupin, who has served as Qualcomm's executive vice president and general counsel since 2000, is stepping down from his post, the company said. The company didn't provide any details about why Lupin is leaving. But his departure comes just a week after the company was dealt another legal blow in its ongoing battle with Broadcom.

Last week, the Bush administration declined to step in to veto a ban imposed by the Federal Trade Commission on importing cell phones using Qualcomm chips that have been found to infringe on a Broadcom patent. The FTC issued the ban in June. Qualcomm is still appealing the decision, which went into effect last week.

Carol Lam, who joined Qualcomm's legal team in February, will be the new general counsel for Qualcomm. Prior to her job with the chipmaker, Lam served as a U.S. Attorney for the Southern District of California.

Update 9:26 a.m. PDT Tuesday: Carol Lam will be the interim general counsel for Qualcomm while the company looks for a replacement. She will not be the permanent general counsel as the story above suggests.

The Bush administration has dealt another blow to chipmaker Qualcomm in its battle to dodge an International Trade Commission's ban on the importation of its advanced cell phone chips into the U.S.

On Monday, the Bush administration ruled it would not intervene and veto the ITC's decision, which was handed down in June. The ITC banned the importation of all cell phones using 3G chipsets from Qualcomm, because Qualcomm was found to have infringed on patents held by rival Broadcom.

The ban still hasn't gone into effect, but it looks like Qualcomm is running out of options. Last month, a U.S. Court of Appeals for the Federal Circuit said it didn't have jurisdiction in the case. And Verizon Wireless, the largest carrier impacted if the ban goes into effect, has already struck a deal directly with Broadcom to license its chips.

Stay tuned for more comments and analysis on what this latest development means for Qualcomm and the rest of the cell phone industry.