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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:

•  Beginning in 1999, and continuing through 2005, Nicholas and other co-conspirators conspired to distribute MDMA (ecstasy), cocaine and methamphetamine; and, to maintain places, namely, the Rodeo Residence, the Warehouse, the Telescope House, and the Turnberry Condo, for the purpose of distributing and using controlled substances.

•  Nicholas directed co-conspirators and associates to invoice him for controlled substances using various code words, including "supplies," "party favors," "refreshments" and "E" (ecstasy).

•  Nicholas spiked the drinks of others with MDMA (ecstasy) without their knowledge, including the drinks of technology executives and representatives who worked for Broadcom's customers.

•  Nicholas hired prostitutes and escorts for himself and customers, representatives, and associates of Broadcom.

•  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.

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

Nancy Heinen, the former general counsel at Apple, filed court papers Friday denying charges by the Securities and Exchange Commission that she orchestrated stock option backdating at the company.

Bloomberg reported that the court papers deny the specific charge that Heinen ordered another lawyer in Apple's legal department to prepare documents authorizing a stock option grant to CEO Steve Jobs with an earlier grant date. However, the documents told a story of a board meeting that never took place, drawing the ire of the SEC and forcing Apple to record charges to reflect the true value of the options.

Heinen and former CFO Fred Anderson have been the public scapegoats for Apple's backdating scandal. While Jobs has admitted that he was aware favorable grant dates were being selected, he has said he didn't understand the accounting implications, and the SEC has thus far declined to charge him with anything. Anderson has settled his case with the SEC, but fired back at Jobs with a press release stating he had in fact informed Jobs of the implications. Apple's board of directors absolved Jobs of any wrongdoing after an internal investigation.

Apple's board knows a good thing when it sees it.

The brief but strong statement it issued this afternoon in defense of Steve Jobs left no doubt about the depth of the board's support for its CEO.

But how about a reality check, folks?

Did anyone really believe Apple would mess with its main meal ticket? A few minutes after the board statement hit the wire, the company announced its latest earnings report--and it was a dazzler: profit soared 88 percent on a 21 percent sales climb. Those are the sort of numbers that buy lifetime job security. The old-timers at the company remember the prolonged time of troubles (pre-Jobs) endured under a succession of increasingly feckless CEOs. Suffice it to say that Jobs would need to get caught on video robbing every gold brick in Fort Knox in broad daylight before this board would lift a finger.

So far, Jobs remains untouched by the investigation into Apple's stock options backdating scandal. This story--for now--stops at the desks of former CFO Fred Anderson who just paid $3.5 million to settle with the Securities and Exchange Commission and the company's ex-chief legal counsel Nancy Heinen, who is defending herself against fraud charges filed by the SEC.

What next? Anderson is hinting at a cover-up. He claims to have informed Jobs of the accounting implications of options backdating back in January 2001. Apple has maintained that Jobs was kept in the dark. But if the feds decide to start taking depositions, the ignorance-is-bliss defense won't hold up. And then we may learn whether all these striving, corporate alpha execs have faulty memories or somebody is a fibber.

The Securities and Exchange Commission is getting ready to file the first charges in its probe into Apple's stock-option backdating investigation, but it appears CEO Steve Jobs is safe, according to news reports.

The San Jose Mercury News reported Monday that Nancy Heinen, former general counsel at Apple, will be charged this week in connection with the investigation into the backdating of stock options for Jobs and other Apple executives. Apple has said some stock-option awards were backdated--a practice, legal if disclosed, in which a stock-option award is tied to a date when the price was low--but that the current management team did nothing wrong.

The implication, of course, being that former managers were to blame. Heinen and former Chief Financial Officer Fred Anderson have previously been named in connection with the investigation, which appears to center on who approved a memo that conjured out of thin air a board meeting in which the option dates were approved. The Mercury News report contains differing accounts of whether Heinen approved those minutes or whether Wendy Howell, another former in-house lawyer, acted on her own.

Heinen's lawyers, quoted in the report, say she was acting on direction from the board and broke no laws. But the Merc also cites sources familiar with Heinen's case who say she has no evidence tying Jobs to the backdating, which would be a big relief for Apple investors.