August 3, 2007

Billionaire speaks of his legal woes (LAT-WP)

By E Scott Reckard & Kim Christensen

Henry T Nicholas III swept through the kitchen of his Newport Coast mansion, cellphone at his ear, talking a mile a minute to one of his attorneys. “I can’t follow your advice because you don’t know enough about me to give me advice,’’ the 6-foot-6-inch billionaire shouted into the phone. “Yeah, I thought I was your friend.’’ The former Broadcom Corp chief executive is talking to lawyers a lot these days as he endures a public spotlight fuelled by a federal investigation into stock manipulation at Broadcom, allegations of drug abuse, an acrimonious divorce and a claim that he once sought to build a subterranean pleasure zone beneath a Laguna Hills mansion.

Nicholas, 47, denies wrongdoing and says through his attorney that some of his accusers are simply trying to extort money from him. Citing advice from his lawyers, Nicholas declined to address specifics of the stock investigation or the allegations made in court documents against him.

But in a marathon interview that began on Tuesday evening and stretched to 3am on Wednesday, Nicholas talked enthusiastically about his eclectic interests — including his efforts to develop military vehicles that can withstand rocket-propelled grenades, his attempt to keep his sister’s killer behind bars and his venture into the music business.

Occasionally, Nicholas touched on some of the trouble that has come his way. “If you want to understand my behaviour, and my wife, and all that crap, here’s what you should know,’’ he said, pointing to a photo of his children. “My wife thinks I should have nothing to do with those kids.’’

“When you first meet Nick, you’re shocked by his hyper-energy,’’ said Robert Magnuson, a former Los Angeles Times executive who now runs the billionaire’s family office. “His mind is always racing. He’s a nonlinear thinker who can discuss the fine points of quantum mechanics one minute and the future of religion the next.’’

Nicholas said that as a youngster he had difficulty reading and doing simple mathematics because of dyslexia and attention deficit disorder. He overcame those problems to earn a Ph.D. in electrical engineering in 1991 and went on to co-found Broadcom, a company that makes computer chips for iPods, mobile phone headsets and TV set-top boxes.

As they launched the company, Nicholas and co-founder Henry Samueli showered employees with stock options that made hundreds of them millionaires. The pair became iconic figures in the tech industry even after the dot-com bust deflated Broadcom stock and put many other companies out of business.

“Henry Nicholas was the fire in that enterprise and the other Henry was more deliberate, and the combination of the two was exactly what the company needed,’’ said Anil Puri, dean of the California State University, Fullerton, business school. “They were head and shoulders above any other tech firm in the county, and they created a company and products that have lasted beyond the dot-com era.’’ In recent years, Nicholas “has not been that visible, except in a sort of negative way,’’ because of news of his marriage problems and other accusations, Puri said. “It’s unfortunate that his life turned out that way. But the spark that he created in those years — you can’t take that away from the guy,’’ he said.

In January 2003, Nicholas resigned from his roles at Broadcom, saying he wanted to repair his tattered marriage. Nicholas’ wife, Stacey, had filed for divorce in fall 2002, soon after, court records show, a group of contractors threatened to disclose Nicholas’ alleged effort to build a secret “lair’’ beneath his Laguna Hills home to indulge in prostitutes and illicit drugs.

The allegations stemmed from a dispute over payment for the construction work, which was resolved by a confidential settlement within a month. In a later flare-up of the matter, Nicholas won a separate judgment against the lead contractor, a court filing showed.

The divorce case was dormant until last year, when Stacey Nicholas revived it, according to divorce-court filings, some of which the Los Angeles Times reviewed in December, shortly before the file was sealed at the couple’s request. The couple’s filings contain competing allegations of drug abuse and infidelity, and as part of the child-custody proceedings Henry Nicholas agreed to undergo alcohol and drug testing during a two-month period.

The tests proved negative for drugs, according to the psychologist who oversaw them. The divorce proceedings, still incomplete, resulted in an agreement in November that allows a son, 10, and daughter, 9, to visit Nicholas on the weekends, the billionaire said. His oldest son, a 13-year-old, no longer talks to him and doesn’t visit.

Pictures of the younger kids on excursions to water parks and ski resorts are omnipresent in the house, often with the children of a close friend of Nicholas’, Chris Berman. Nicholas said Berman was his partner in the venture to build heavily armored transport vehicles, which Nicholas wants to donate to the Army.

A different portrait emerges in a lawsuit by Kenji Kato, 35, an assistant to Nicholas from 1999 to early 2006. Kato alleges that the billionaire owes him $150,000 in back wages. His duties were at first “innocent and clean,’’ Kato wrote in court papers, and included such tasks as arranging for private jets and limos, securing backstage passes to concerts and planning parties. But as time went on, Nicholas’ excesses — in drugs and women — took over as his former boss became erratic and abusive, stayed awake for days on end, slipped drugs into others’ drinks and boasted of being so powerful he could make people “disappear,’’ Kato contended in his suit and in an interview with the Times.

Kato’s allegations are being examined by federal authorities investigating Nicholas’ role in the manipulation of stock options at Broadcom, according to people with knowledge of the investigation. Earlier this year, the company’s own investigation found that Nicholas bore “significant responsibility’’ for the so-called backdating of options to make them more valuable. Through his attorney, Nicholas has denied any wrongdoing.
Nicholas in turn has sued Kato, contending that he signed a confidentiality agreement barring him from disclosing information about Nicholas and his businesses. Nicholas’ lawyer, Steven A Silverstein, also has accused Kato of attempting to extort a $9-million settlement from his client, under threat of making the sex and drug allegations public. The acrimonious dispute escalated last September when Silverstein hired private investigators to watch Kato around the clock for 4 1/2 months. Kato said he knew “from the get-go’’ that he was being followed. “I almost think they made it obvious, as an intimidation thing,’’ Kato said in a recent interview.

Kato also described Nicholas as a genius, albeit an awkward one. “He wanted so much to be cool and accepted,’’ Kato said. “That’s why he surrounded himself with rock stars.’’

Steve Ipsen, president of the Los Angeles County Association of Deputy District Attorneys, says the Nicholas he knows bears no resemblance to the man described by Kato. Ipsen said he worked with Nicholas to defeat Proposition 66, the 2004 initiative that would have amended California’s “three strikes’’ law. Ipsen said Nicholas also provided significant financial support for a state law that bars convicted sex offenders from living near schools and parks and requires them to be tracked by global positioning technology. “His willingness to put his time and money behind issues is unparalleled,’’ Ipsen said.

Ipsen labeled as absurd the recently surfaced tales of drug abuse and prostitutes. “I worked with him night and day and have met him many times since then in the last three years,’’ Ipsen said. “I have never seen any evidence of drug use.’’

For his part, Nicholas remains optimistic. “In the world of justice, I have some faith that if I have been a good person, following the right moral compass, things will turn out well for me,’’ he said.