Gifts to schools of engineering at UCLA and UC Irvine will help
faculty, graduate students and undergraduate students
Irvine, Calif., December 21, 1999
 |
Henry
Samueli and his wife, Susan, have personally donated $50 million to
the schools of engineering at UCLA and UC Irvine. Henry
Samueli is the co-founder of Broadcom Corp. in Irvine, Calif. This
donation will be used to help both schools to enhance their
increasingly important role in the development of the region as one of
the nation's high-tech business hubs. The Samuelis have designated $30
million of their gift to UCLA and $20 million to UCI.
At UCLA, $10 million will establish endowments for graduate
fellowships, teaching awards and term chairs, and $20 million will be
available for capital construction and other high-priority projects.
In recognition of this contribution, the UCLA School of Engineering
and Applied Science will be renamed The
Henry Samueli
School of Engineering and Applied Science.
At UCI, the $20 million donation – the largest single gift in UCI's
history – will enable the School of Engineering to support faculty
research through endowed professorships, create competitive
fellowships for graduate students and competitive scholarships for
undergraduates, and support other priority projects in the school. The
endowed professorships will be held in electrical engineering,
computer engineering and microelectromechanical systems. In
recognition of Samueli's support, UCI's engineering school will become
The Henry
Samueli School of Engineering.
|
Henry Samueli's
ties to the UC system are extensive, starting as a student at UCLA,
where he received a B.S., M.S. and Ph.D. in electrical engineering.
After working in the private sector, he returned to UCLA in 1985 as a
faculty member in the Electrical Engineering Department, and became a
full professor in 1994. He has been on a leave of absence from the
UCLA faculty since 1995. Since Broadcom's inception in 1991, he has
also been active at UCI, including serving on the Board of Trustees of
the UCI Foundation, as a board member of the School of Engineering's
Corporate Affiliates Program, and as vice chair of the UCI Chief
Executive Roundtable.
"The Samuelis' gift is special not only because it will have a
tremendous positive impact on the engineering schools at two UC
campuses, but because it comes from someone whose involvement with the
UC system began as a student, continued as a faculty member, and has
developed even further as a business leader," University of California
President Richard C. Atkinson said. "We are proud of
Henry Samueli's
association with UC and of his many contributions to the excellence of
the University of California system."
Atkinson noted that the Samuelis' gift will enhance UC's ongoing
efforts to address the serious shortage of skilled engineers in
California and the nation, to recruit and retain outstanding
engineering faculty and to support important campus projects.
"With the support from the governor and Legislature, the University of
California is committed to a 40 percent increase in the enrollment of
undergraduate and graduate students in engineering and computer and
information sciences over the next few years because California's
economy, to remain competitive in the international marketplace, needs
cutting-edge research and a highly trained workforce," Atkinson said.
"The gift from the Samuelis will help us immensely in meeting this
commitment."
Henry Samueli
is recognized as one of the leading experts in broadband
communications circuits, publishing more than 100 papers on the
subject. He has been instrumental in founding two high-tech companies,
first PairGain Technologies, a telecommunications equipment maker, in
1988, and then Broadcom, the Irvine-based company he founded along
with Henry
T.
Nicholas III in
1991. Broadcom is a leading provider of semiconductors that enable the
digital transmission of voice, data and video content for home and
business applications.
"Having experienced firsthand the benefit of the high-quality
education provided by the University of California, I can think of no
higher priority for California's and the nation's future than the
support of such an outstanding university system," Samueli said.
"Susan's and my gift is an expression of our gratitude to UCLA and UC
Irvine, and a demonstration of our commitment to the state's future by
further enhancing the capabilities of these two excellent engineering
schools. The work of their faculty and alumni has had, and will
continue to have, an extraordinary impact on the lives of all
Californians and the rest of the world."
Leaders at UCLA and UCI expressed their appreciation for the Samuelis'
gifts and noted the significance of the impacts they will have on the
two schools of engineering.
"This landmark contribution will help the UCLA School of Engineering
and Applied Science enhance its position as a leader in engineering
and technology for the 21st century," UCLA Chancellor Albert Carnesale
said. "We are enormously grateful to
Henry and Susan
Samueli for embracing UCLA's commitment to support the efforts of our
students and faculty in the science and technology arena."
"This very generous and strategic gift reflects the Samuelis' deep
commitment to education and research, " UCI Chancellor Ralph J.
Cicerone said. "Henry
and Susan Samueli understand the need to grow the intellectual capital
that is the lifeblood of a research university; their gift will
provide crucial support to UCI engineering students and faculty,
enabling them to create the new knowledge that drives technological
progress. UCI is honored to name our engineering school after such an
illustrious student, faculty member and business leader."
"Henry Samueli
has made significant contributions to the excellence of our electrical
engineering department and the school," said A.R. Frank Wazzan, dean
of the UCLA School of Engineering and Applied Science. "His
outstanding accomplishments as a UCLA student, his role as a
distinguished member of our faculty and his performance in his
co-leadership role with Dr.
Henry
Nicholas, also
a UCLA graduate, at the helm of one of the highest ranked companies
worldwide in the fields of communications and information technology
have established him as a leader in academe and industry."
"The Samuelis' gift will have a major impact on the UC Irvine School
of Engineering's ability to help meet the increasing demand for
high-tech engineers, and to develop new technology to fuel the growth
of high-tech business in this region," said Nicolaos Alexopoulos, dean
of the UCI School of Engineering. "High-tech engineers are an
absolutely crucial ingredient in the future economy of America and the
world, and the Samuelis' gift enables UCI to have a major role in the
future of engineering."
Henry and Susan
Samueli also are active in the community as advocates of education and
the arts. Henry
Samueli is on the board of Project Tomorrow, a community partnership
to enhance K-12 science education in Orange County, as well as the
board of the Orange County Performing Arts Center. He received the
1999 National Human Relations Award from the Orange County Chapter of
the American Jewish
Committee.
Susan Samueli serves on the board of the Orangewood Children's
Foundation and also is on the boards of Opera Pacific and
Temple Beth
El in Aliso Viejo.
The UCLA School of Engineering and Applied Science, which is ranked
20th among engineering schools by U.S. News & World Report, has been
on the cutting-edge of technological advances since its inception as
the College of Engineering in 1945. In addition to the school's
strengths in traditional engineering programs such as aerospace,
electrical engineering and computer science, it is advancing research
in the evolving fields of wireless communications and networking,
micromachines and biomedical engineering.
The school continues to attract leading faculty and exceptional
students from around the world, and offers more than 30 academic and
professional degree programs as well as an interdepartmental graduate
degree in biomedical engineering. For more information about the
school, see
www.engineer.ucla.edu.
UCI's School of Engineering is ranked among the nation's top 50
graduate engineering programs by U.S. News & World Report, and the
number of undergraduates majoring in engineering at UCI has grown
steadily since 1995. This fall, the number of undergraduate majors in
engineering increased by 23 percent over the previous year. For more
information about the school, see www.eng.uci.edu.
 |
LOS ANGELES - The co-founder of semiconductor maker Broadcom Corp.,
under scrutiny in a federal stock
options probe, was accused seven years ago of building an underground
hideaway at his estate to indulge in drugs and sex with prostitutes,
according to court documents.
Death Threats
In a draft complaint made against Henry T. Nicholas III, a construction
crew claimed the billionaire
failed to pay them millions of dollars for work performed between 1998 and
2002, and used "manipulation, lies, intimidation, and even death threats"
when anyone threatened to quit.
|
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The illegal network of tunnels and rooms
underneath Nicholas' Laguna Hills estate was kept secret from his wife and city
officials, the documents said.
The purpose of one secret room was to
allow Nicholas to "indulge his appetite for illegal drugs and sex with
prostitutes," the crew claimed.
The allegations in the draft complaint were not filed with the crew's
lawsuit against Nicholas in 2002, which was later resolved in a
confidential settlement. However, the complaint was attached in 2005 as a
supporting document to a lawsuit filed in Orange County Superior Court by a man
seeking a larger share of the settlement.
Some of the allegations were similar to those made by former Nicholas employee
Nicholas' attorney Steven A. Silverstein has characterized Kato's claims as an
extortion attempt and said of the construction crew complaint, "all of the
allegations are denied."
Nicholas, 47, also has been identified by an internal Broadcom audit as bearing
"significant responsibility" for the way stock options were granted and dated
during the high-flying days of the Irvine-based technology company.
The company said it found evidence that Nicholas, who left Broadcom in 2003,
personally approved of options dates that led the company to restate earnings
and record $2.22 billion in non-cash expenses. Another Nicholas attorney, John
W. Spiegel, has said his client did not knowingly engage in selecting grant
dates after the fact.
Riding the high-tech wave of the 1990s, Henry T. Nicholas III became one
of the nation's richest people, a brash and innovative billionaire who gave
millions to charity and made hundreds of his employees wealthy with stock
options.
A decade later, the 47-year-old
faces a federal investigation and accusations from a former employee
that threaten to tarnish his image as one of the tech industry's leading
entrepreneurs and one of Orange County's most generous philanthropists.
Federal authorities are probing Nicholas' role in the manipulation of stock
option grants at Broadcom Corp., the Irvine company he co-founded and led
until 2003. The inquiry follows an internal company review that found
Nicholas bore "significant
responsibility" for the so-called backdating of option grants.
In conducting their probe, federal investigators have taken note of a civil
suit filed in Los Angeles County Superior Court by Kenji Kato, who worked
for Nicholas as an administrative assistant for nearly seven years beginning
in 1999.
In court filings, Kato alleged that
Nicholas required him to oversee supplies of cocaine and other drugs, pay
prostitutes from a "petty cash" fund and conceal his boss' "extracurricular
activities," including his alleged drug use, from his wife and others.
Nicholas' lawyer called the allegations "crazy" and contended the civil suit
was a $9-million extortion scheme. Los Angeles County sheriff's detectives
investigated the extortion allegation and the case was under review by the
district attorney, officials said.
Federal prosecutors, meanwhile, were examining the issues in the civil case
to determine whether they were relevant to the options case, according to
two people with knowledge of the probe who spoke on condition of anonymity
because it was an active investigation.
Federal agents this week served subpoenas on several of Nicholas' employees,
but not the billionaire himself, according to another person with knowledge
of the matter who spoke on condition of anonymity.
Henry Nicholas has denied those allegations, and also denied the claims in
Kato's suit.
"These absurd allegations seem to be
intended to disrupt the principal focus of my work, post-retirement, which
would be in criminal justice and medical research," he said in a
statement to The Times.
Nicholas met with The Times at his office in Aliso Viejo on Thursday and
again at his $19.5-million home in Newport Coast on Friday, accompanied both
times by lawyers and a public relations advisor.
Nicholas said he had been counseled not to discuss the stock options probe
or the allegations in the civil suit. But he did say that Kato sank into
drug abuse while working for him at Level 7, a music and media company.
"We don't have drug testing," Nicholas said Friday. "We just set the bar so
high you have to be sober to meet it. That was too high, unfortunately, for
Kenji."
In an interview, Kato attorney Joseph Kar acknowledged that his client had
used hard drugs, but said Nicholas introduced him to the practice.
"Before he met Nick, I think the most he had ever done was to smoke
marijuana," Kar said.
Kato, 35, was a Pepperdine
University graduate student in law and business when Nicholas hired him in
1999. The son of former Oxnard Mayor Tsujio
Kato, he met Nicholas through an event-planning business operated by his
brother, Dean Kato, according to records and interviews.
"We would entertain him and his guests, by arranging lavish events, dinners,
concerts, parties fit for only billionaires," Kenji Kato said in a court
filing.
In his lawsuit, Kato alleged that Nicholas and his companies owed him
$150,000 in unpaid wages on his $100-an-hour contract — and that they had
later breached an agreement to settle his claims for $3 million.
In subsequent court filings, Kato
also alleged that Nicholas secretly spiked the drinks of business associates
with drugs, ordered aides to fill balloons with laughing gas to entertain
party guests and left drug paraphernalia strewn about a second Newport Coast
house owned by Nicholas where Level 7 had a recording studio.
Lawsuit: Ex-Broadcom CEO used drugs, prostitutes
Amid ongoing investigation of options backdating at company,
allegations by former employees
draw further attention of federal agencies
By Grant Gross, IDG News Service
July 13, 2007 Talkback E-mail Printer Friendly Reprints
A civil lawsuit accusing Henry Nicholas III, the former president and CEO of
Broadcom Corp., of mistreating employees, using illegal drugs and paying for
prostitutes, has reportedly caught the attention of U.S. law enforcement
officials investigating stock
options backdating at the company.
Fr
Nicholas, who resigned from Broadcom in January 2003, is the target of a
civil lawsuit brought by cousins Kenji and Scott Kato, both former employees
of Nicholas. The lawsuit, filed in November in Superior Court of California
for the County of Los Angeles, alleges that Nicholas and his lawyers reneged
on a settlement for wrongful termination and other claims.
The Wall Street Journal reported Friday that the U.S. Attorney's Office for
the Central District of California, which is investigating stock options
backdating at Broadcom, has begun looking into the Katos' claims. The U.S.
Federal Bureau of Investigation interviewed Kenji Kato in April, and this
week, it began interviewing other Nicholas employees, the news report said.
Nicholas' lawyer, Steven Silverstein, called the allegations "complete and
total nonsense, a fabrication." Kenji and Scott Kato are trying to extort
money from Nicholas, he said.
Asked about the U.S. attorney's interest in the civil case, he said, "What
could this possibly have to do with stock options backdating?"
Kenji Kato's lawyer, Joseph Kar, declined to comment on the U.S. Attorney's
interest in the case. A spokeswoman for the U.S. Attorney's office didn't
immediately return a phone call seeking comment on the investigation.
Broadcom, a chip maker for communications devices, announced in January it
would take a $2.24 billion charge for stock options backdating. Broadcom
said it found options for 232.9 million shares of company stock that had
been backdated, with 9.7 million of those shares going to executive
officers.
Kenji Kato, who describes himself in
court documents as a former personal assistant of Nicholas', said Nicholas
and his lawyers offered him a settlement of more than $2.9 million in
November, then withdrew it. Kato had accused Nicholas of wrongful
termination, breach of contract and infliction of emotional distress, among
other things.
Kenji Kato worked for Nicholas from
October 1999 to April 2006, and during much of that time, Nicholas threw
wild parties and regularly used illegal drugs, such as cocaine, according to
a court filing from May. While at Broadcom,
Nicholas hired prostitutes for clients and for himself, and he spiked
customer drinks with powdered ecstasy pills to lower their "inhibitions and
guard," Kato said in the filing.
Silverstein
 |
Silverstein said the proposed settlement between Nicholas and Kato was part
of a Los Angeles County Sheriff's Department sting operation into the Katos'
extortion attempts. "From the first time we ever heard from those guys, we
knew it was false ... and we contacted police," Silverstein said.
Nicholas' lawyer, Steven Silverstein, didn't immediately return a phone call
seeking comment on the lawsuit. In addition, Kato signed a confidentiality
agreement when working for Nicholas, according to documents filed by Level 7
LLC and The Management Company LLC, two companies owned by Nicholas.
|
Kato has threatened to make public "certain sensitive private alleged facts
... which he had expressly promised to keep private," the Level 7 court
documents say. "Kato's wrongful conduct by issuing these threats ... will
cause great and irreparable injury to plaintiffs."
Nicholas regularly yelled at employees, and he demanded that
Kenji Kato
carry a bag with illegal drugs for him, according to Kenji Kato's filing.
Nicholas also demanded that Kato use drugs along with him, Kato said.
"I was regularly exposed to ... a
high degree of debauchery while working
for Nick," he said in his filing. "The first time I used cocaine was when
Nick shoved a tiny spoon up my nose because I was falling asleep, while he
was talking to me. Over time, I got sucked into his extreme lifestyle."
By the end of Kato's employment, Nicholas was using "large quantities" of
illegal drugs, including cocaine and heroin, and had withdrawn from his
friends and family, according to Kato's May filing. Nicholas had stopped
paying Kato, although he still demanded work from him, and when Kato walked
out, Nicholas owed him $150,000 in back pay, the court documents say.
Nicholas had promised Kato employee benefits and Broadcom stock options, but
he never delivered, according to Kato's filing.
This story was updated Billionaire accused of building hidden sex and drugs
den
By Leonard Doyle in Washington
Published: 19 July 2007
Henry T Nicholas III was, for a brief period, one of the richest men in
America. A patron of the Orange County arts scene, he had a trophy wife and
enjoyed playing Rod Stewart numbers at full volume from the steps of his
mansion.
The 6ft 6ins engineer founded the company
Broadcom in 1991, making the
innards of cable TV boxes at his Redondo Beach apartment. When it floated in
the go-go years of the internet boom, his shares went up in value 40 times
and he soon acquired the trappings of the super rich: private jets, a
Lamborghini and a mansion in Laguna Hills with its own equestrian estate
and, court documents claim, his personal brothel, hidden in an underground
grotto.
Secret bar
The grotto was reached by hidden doors with secret levers, leading to
tunnels and a 2,000sq-ft underground sports bar called "Nick's Café".
According to claims in court papers, this was a "secret and convenient
lair", to cater for "Mr Nicholas's manic obsession with prostitutes" and his
"addiction to cocaine and ecstasy".
He used his private jet to pick up prostitutes as far away as New Orleans,
Chicago, Las Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends", according to documents filed with Orange County Superior
Court. "He provided his guests with transportation and cocaine, ecstasy,
methamphetamines, marijuana, mushrooms, and nitrous oxide [laughing gas]".
In January 2003, Mr Nicholas quit Broadcom, saying he intended to spend more
time with his children and tend to his marriage. Among the many legal
troubles he now faces is a divorce battle with his wife Stacey, with whom he
controls $1.1bn in Broadcom shares.
Mr Nicholas apparently told his wife about the underground passageways and
rooms under their mansion when work began. But the construction was said to
be far more elaborate than she imagined and ultimately cost
$30m to build
over three years.
In August 2000, Mr Nicholas took his wife to Hawaii for a week while work
was being finished. The contractors were "threatened with financial ruin -
whatever it took - if they failed to complete the task within a week", it is
claimed.
Armed guards
But the noise and the sight of armed guards blocking public horse-trails
near the site led neighbours to complain. The authorities shut the building
site. They did not know "the [underground] room ceiling was covered over so
it was not observable from above ground", according to the contractors.
At the time, Mr Nicholas told the Los Angeles Times the structure was "a
pump-house" for run-off water. The contractors say
the underground site,
called Ponderosa, "was infamous for excessive extravagance, its sex rooms
and its million-dollar sound equipment", the documents claimed. The
allegations were made by a construction company which says it was not paid.
The claims have been denounced as falsehoods by Mr Nicholas's lawyer but
echo other claims made by Kenji Kato, Mr Nicholas's former assistant. Mr
Kato says he is owed $150,000 in back wages, and alleges serial drug use and
other debauchery at the mansion.
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- Sordid allegations add to billionaire's woes
Flush with wealth from Broadcom Corp.'s 1998 public stock offering, computer
chip magnate Henry T. Nicholas III made a few additions to his equestrian estate
in Laguna Hills: hidden doors and secret
levers, an underground grotto, tunnels and a 2,000-square-foot sports bar he
called "Nick's Cafe."
But there was more, according to a claim
made in court documents: plans for a "secret and convenient lair" with hidden
entries for Nicholas to indulge his "manic obsession with prostitutes" and
"addiction to cocaine and Ecstasy."
--------------------------------------------------------------------------------
FOR THE RECORD:
Nicholas lawsuit: An article Wednesday in Business about Broadcom co-founder
Henry T. Nicholas III quoted attorney Joseph Kar as saying his client, Kenji
Kato, was unfamiliar with allegations in court papers against Nicholas by
contractor Roman James but knew of the court case because "Nicholas had
mentioned it infrequently." Kar said Nicholas mentioned James infrequently, not
the case. —
--------------------------------------------------------------------------------
The filing in Orange County Superior
Court added that Nicholas had the interior built in warehouse space nearby,
which became his "personal brothel" until his wife caught him having sex with a
prostitute there.
The allegations by a construction team, denounced as fabrications by Nicholas'
lawyer, echoed others in a recently surfaced lawsuit filed late last year by
Kenji Kato, a Nicholas assistant from 1999 to 2006.
In his suit, Kato claims that Nicholas and his companies owe him $150,000 in
back wages. Filings in the suit allege
drug use and debauchery at a Newport Coast home owned by Nicholas, who denies
the accusations.
Responding in a lawsuit pending in Orange County Superior Court, Nicholas has
alleged that Kato is bound by confidentiality agreements that bar him from
disclosing information about the billionaire and his businesses.
Kato's allegations are being examined by
federal authorities probing Nicholas' role in the manipulation of stock options
at Broadcom,
according to people with knowledge of the investigation. Through his
attorney, Nicholas has denied any wrongdoing.
Nicholas, 47, co-founded Broadcom in 1991 and served as its chief executive
until 2003. Broadcom's success made him one of the nation's richest men, and he
has given millions to schools, the Orange County Performing Arts Center and
other causes.
The alleged plans for the covert
underground hideaway, to be connected to Nicholas' Laguna Hills home, were
detailed by Roman James of Newport Beach, the lead contractor on the project,
and six other contractors, engineers and construction workers who worked on it
and filed a lawsuit against Nicholas in 2002.
The construction team accused Nicholas of failing to pay millions of dollars for
work performed between April 1998 and April 2002. Nicholas was said to have used
"manipulation, lies, intimidation and even death threats" to pressure "nearly
every contractor and vendor" on the project to perform extra work without pay
"at warp speed."
The allegations were contained in a draft complaint that was prepared but not
filed as part of the contractors' lawsuit, which was resolved in a confidential
settlement in 2002.
The draft complaint, however, was attached in 2005 as a supporting document to a
lawsuit against the attorney for James, James R. Traut, by another man who
sought a larger share of the 2002 settlement.
There was a 2006 judgment in that case, but the outcome was not clear in court
documents and attorneys involved in that case could not be reached for comment.
Nicholas was not named in that case.
The Times obtained the draft complaint from the Orange County Superior Court
file — and blanket denials of its allegations from the Nicholas camp — on
Tuesday.
Nicholas attorney Steven A. Silverstein said Tuesday that "all of the
allegations are denied" and charged that the similarity between the Roman and
Kato cases was not coincidental.
"Basically, where Kenji got his idea for his extortion came from Roman James,"
Silverstein said, contending that Kato was familiar with the previous case.
James could not be reached Tuesday. His lawyer, Traut, did not return repeated
messages left at his Santa Ana office.
In court filings in his lawsuit, Kato said Nicholas made him
oversee supplies of cocaine and other
drugs, pay prostitutes from a "petty cash" fund and conceal his boss' illicit
activities.
Kato's lawyer, Joseph Kar, said his client knew of the James case only because
"Dr. Nicholas had mentioned it infrequently." But Kar said he and his client
"have not seen that complaint" and were unfamiliar with its allegations.
Any similarity in the lawsuits "goes to corroborate the abuse and misbehaving of
Mr. Nicholas" detailed in Kato's court papers, Kar said.
Nicholas made no secret of the underground passageways and rooms under his
Laguna Hills home, but the filing by James contended the subterranean complex
was more elaborate than even Stacey Nicholas was aware of and ultimately cost
$30 million over three years.
Nicholas took his wife to Hawaii for a week in August 2000 while work on his
secret chamber was being completed, the filing claimed. Stacey Nicholas has
since filed for divorce.
"Plaintiffs were promised payment and/or threatened with financial ruin —
whatever it took — if they failed to complete the task within a week," the draft
complaint said, and hundreds of workers began toiling 18 hours a day to excavate
and pour concrete.
The noise and presence of armed guards hired to block access to community horse
trails near the project prompted neighbors to complain to Laguna Hills
authorities, who discovered the work was being performed without a permit and
shut it down, "although the room ceiling was covered over so it was not
observable from above ground," the contractors said.
In a September 2000 Times story about the dispute, Nicholas said the newest
underground structure was "a pump house" to handle water runoff from the horse
trails.
The draft complaint disputed that account and claimed the new construction was
tied to the alleged separate underground facility being built by Nicholas.
It said Nicholas, anticipating he would
eventually obtain a permit from the city "to complete his lair," implemented a
backup plan, arranging "to completely fabricate the interior" of the hideaway at
a Laguna Niguel
warehouse.
The location, referred to as the Pond or the Ponderosa, "was infamous for its
excessive extravagance, its sex rooms and its million-dollar sound equipment,"
the document alleged.
Nicholas had his private jet pick up prostitutes in New Orleans, Chicago, Las
Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends," the draft
complaint said. "He provided his guests
with transportation and cocaine, Ecstasy, methamphetamines, marijuana,
mushrooms, and nitrous oxide [laughing gas]" — and even arranged for his private
helicopter to land at a nearby hospital helipad, it said.
The lawsuit alleged that Nicholas required pledges of loyalty and secrecy from
the contractors and at one point threatened James' life.
Nicholas, in an interview with The Times last week about the Kato suit, said the
allegations of drug use against him were especially absurd because he had been
recognized by authorities for his efforts to boost law enforcement.
Sordid allegations add to billionaire's woes
Already under a legal cloud, Henry T. Nicholas III, one of Orange County's
most generous philanthropists, is accused of drug use and other excesses.
By Kim Christensen and E. Scott Reckard, Times Staff Writers
July 14, 2007
Henry T. Nicholas III
click to enlargeRiding the high-tech wave of the 1990s, Henry T. Nicholas III
became one of the nation's richest people, a brash and innovative billionaire
who gave millions to charity and made hundreds of his employees wealthy with
stock options.
Stock options
A decade later, the 47-year-old faces a
federal investigation and accusations from a former employee that
threaten to tarnish his image as one of the tech industry's leading
entrepreneurs and one of Orange County's most generous philanthropists.
Federal authorities are probing
Nicholas' role in the manipulation of stock option grants at
Broadcom
Corp., the Irvine company he co-founded and led until 2003. The inquiry follows
an internal company review that found Nicholas bore "significant responsibility"
for the so-called backdating of option grants.
In conducting their probe, federal investigators have taken note of a civil suit
filed in Los Angeles County Superior Court by
Kenji Kato, who worked for
Nicholas as an administrative assistant for nearly seven years beginning in
1999.
In court filings, Kato alleged that
Nicholas required him to oversee supplies of cocaine and other drugs, pay
prostitutes from a "petty cash" fund and conceal his boss' "extracurricular
activities," including his alleged drug use, from his wife and others.
Nicholas' lawyer called the allegations "crazy" and contended the civil suit was
a $9-million extortion scheme. Los Angeles County sheriff's detectives
investigated the extortion allegation and the case was under review by the
district attorney, officials said.
Federal prosecutors, meanwhile, were examining the issues in the civil case to
determine whether they were relevant to the options case, according to two
people with knowledge of the probe who spoke on condition of anonymity because
it was an active investigation.
Federal agents this week served subpoenas on several of Nicholas' employees, but
not the billionaire himself, according to another person with knowledge of the
matter who spoke on condition of anonymity.
divorce
The Kato case adds another layer to
Nicholas' legal tribulations, which include a divorce case with allegations of
drug use against him by his estranged wife, Stacey Nicholas.
Henry Nicholas has denied those allegations, and also denied the claims in
Kato's suit.
"These absurd allegations seem to be intended to disrupt the principal focus of
my work, post-retirement, which would be in criminal justice and medical
research," he said in a statement to The Times.
Nicholas met with The Times at his office in Aliso Viejo on Thursday and again
at his $19.5-million home in Newport
Coast on Friday, accompanied both times by lawyers and a public relations
advisor.
Nicholas said he had been counseled not to discuss the stock options probe or
the allegations in the civil suit. But he did say that Kato sank into drug abuse
while working for him at Level 7, a music and media company.
"We don't have drug testing," Nicholas said Friday. "We just set the bar so high
you have to be sober to meet it. That was too high, unfortunately, for Kenji."
In an interview, Kato attorney Joseph Kar acknowledged that his client had used
hard drugs, but said Nicholas introduced him to the practice.
"Before he met Nick, I think the most he had ever done was to smoke marijuana,"
Kar said.
Kato, 35, was a Pepperdine University graduate student in law and business when
Nicholas hired him in 1999. The son of former Oxnard Mayor Tsujio Kato, he met
Nicholas through an event-planning business operated by his brother, Dean Kato,
according to records and interviews.
"We would entertain him and his guests, by arranging lavish events, dinners,
concerts, parties fit for only billionaires," Kenji Kato said in a court filing.
In his lawsuit, Kato alleged that Nicholas and his companies owed him $150,000
in unpaid wages on his $100-an-hour contract — and that they had later breached
an agreement to settle his claims for $3 million.
In subsequent court filings, Kato also alleged that Nicholas secretly spiked the
drinks of business associates with drugs, ordered aides to fill balloons with
laughing gas to entertain party guests and left drug paraphernalia strewn about
a second Newport Coast house owned by Nicholas where Level 7 had a recording
studio.
Nicholas also was said by Kato to sometimes stay up for days on end.
"At times, when I was required to stay at Nick's home … he would wake me up and
make me drink and do drugs with him, because that was one of his favorite things
to do," Kato said in court papers. His case is pending.
In his statement, Nicholas noted that "during the period of alleged drug use, I
received numerous awards for my work in criminal justice from district attorneys
and various police organizations."
"As for my supposed abnormal 'sleep habits,' the longest time I recall staying
awake in the last 10 years was doing several all-nighters side by side with our
current attorney general, Jerry Brown, to defeat Proposition 66," Nicholas said
in the statement, referring to the 2004 initiative that would have amended the
state's "three strikes" law.
In addition to being Nicholas' assistant, Kato also worked for Level 7, which
has worked with bands including Linkin Park. Bands occasionally recorded and
partied at the home where Level 7 had its studio.
It was there that much of the alleged drug abuse occurred, according to Kato and
four other former employees who signed sworn statements about their experiences.
"On regular occasions … I was ordered to
fill-up up to 20 balloons of nitrous oxide and deliver them to Dr. Nicholas; or,
when I was required to clean up after Dr. Nicholas I frequently found remnants
of usage of drugs, such as straws and plates, residue of cocaine, nitrous oxide
balloons and alcohol," Gerald Wada, a staffer for four months in 2006, said in
court papers.
Nicholas disputed the allegations. He said he helped Chester Bennington, the
singer for Linkin Park, kick an addiction to alcohol and prescription drugs,
which Bennington confirmed Friday. "When you wake up and have a Jack Daniel's
for breakfast, it's a pretty bad sign," Bennington said.
Denise Boudreau, who is described in Kato's declaration as a purveyor of drugs
to Nicholas, called the accusation "ridiculous."
"It was so over the top it was funny," said Boudreau, who works for Level 7. "I
thought Kenji was losing it."
Boudreau said Kato was resentful when Nicholas and others running Level 7
discovered that Kato had botched many assignments at the record company and
expelled him from Nicholas' "inner circle."
Boudreau said she occasionally saw drugs used at the recording studio, but only
by musicians and that Nicholas was never present.
On behalf of Nicholas, attorney Steven A. Silverstein has sued Kato in Orange
County Superior Court, saying that Kato is bound by confidentiality agreements
that bar him from disclosing information about Nicholas and his businesses. That
case is still pending.
Although court records included a draft copy of a settlement agreement with Kato
for $3 million, Silverstein said that was the product of negotiations he
conducted as part of a sting operation directed by sheriff's detectives.
"There was never, ever, ever any intent to ever pay a penny, not one penny, for
the extortionate demands," Silverstein said
Court records show that at one point Silverstein wore a sheriff's "wire" to
secretly record a settlement meeting with Kato and three of his lawyers, some of
whom threatened to go public with Kato's allegations.
"They unambiguously said, 'If you pay us $9 million we will make certain that no
one ever knows about this information,' " Silverstein said.
Kar denied any attempt at extortion and said he did not expect to be charged
with wrongdoing.
Nicholas founded Broadcom in 1991 with Henry Samueli, his former engineering
professor at UCLA, who now owns the Anaheim Ducks hockey team and remains
chairman of the Irvine computer chip maker.
In a filing with the Securities and Exchange Commission, Broadcom exonerated
Samueli from backdating stock options but found "substantial evidence that Dr.
Nicholas was at times involved with the selection of grant dates after the
fact."
Nicholas' criminal attorney, John W. Spiegel, acknowledged that some stock
option grants should have been accounted for differently, but said the company's
investigation showed Nicholas "did not knowingly engage in selecting grant dates
after the fact."
Nicholas stepped down from Broadcom in January 2003, but his family trust still
owns nearly 30% of its voting shares.
LOS ANGELES - The co-founder of semiconductor maker Broadcom Corp., under
scrutiny in a federal stock options
probe, was accused seven years ago of building an underground hideaway at his
estate to indulge in drugs and sex with prostitutes, according to court
documents.
ADVERTISEMENT
In a draft complaint made against Henry T. Nicholas III, a construction crew
claimed the billionaire failed to pay
them millions of dollars for work performed between 1998 and 2002, and used
"manipulation, lies, intimidation, and even death threats" when anyone
threatened to quit.
The illegal network of tunnels and rooms
underneath Nicholas' Laguna Hills estate was kept secret from his wife and city
officials, the documents said.
The purpose of one secret room was to allow Nicholas to "indulge his appetite
for illegal drugs and sex with prostitutes," the crew claimed.
The allegations in the draft complaint were not filed with the crew's
lawsuit against Nicholas in 2002, which was later resolved in a
confidential settlement
. However, the complaint was attached in 2005 as a supporting document to a
lawsuit filed in Orange County Superior Court by a man seeking a larger share of
the settlement.
Some of the allegations were similar to those made by former Nicholas employee
Nicholas' attorney Steven A. Silverstein has characterized Kato's claims as an
extortion attempt and said of the construction crew complaint, "all of the
allegations are denied."
Nicholas, 47, also has been identified by an internal Broadcom audit as bearing
"significant responsibility" for the way stock options were granted and dated
during the high-flying days of the Irvine-based technology company.
The company said it found evidence that Nicholas, who left Broadcom in 2003,
personally approved of options dates that led the company to restate earnings
and record $2.22 billion in non-cash expenses. Another Nicholas attorney, John
W. Spiegel, has said his client did not knowingly engage in selecting grant
dates after the fact.
Riding the high-tech wave of the 1990s, Henry T. Nicholas III became one
of the nation's richest people, a brash and innovative billionaire who gave
millions to charity and made hundreds of his employees wealthy with stock
options.
A decade later, the 47-year-old
faces a federal investigation and accusations from a former employee
that threaten to tarnish his image as one of the tech industry's leading
entrepreneurs and one of Orange County's most generous philanthropists.
Federal authorities are probing Nicholas' role in the manipulation of stock
option grants at Broadcom Corp., the Irvine company he co-founded and led
until 2003. The inquiry follows an internal company review that found
Nicholas bore "significant
responsibility" for the so-called backdating of option grants.
In conducting their probe, federal investigators have taken note of a civil
suit filed in Los Angeles County Superior Court by Kenji Kato, who worked
for Nicholas as an administrative assistant for nearly seven years beginning
in 1999.
In court filings, Kato alleged that
Nicholas required him to oversee supplies of cocaine and other drugs, pay
prostitutes from a "petty cash" fund and conceal his boss' "extracurricular
activities," including his alleged drug use, from his wife and others.
Nicholas' lawyer called the allegations "crazy" and contended the civil suit
was a $9-million extortion scheme. Los Angeles County sheriff's detectives
investigated the extortion allegation and the case was under review by the
district attorney, officials said.
Federal prosecutors, meanwhile, were examining the issues in the civil case
to determine whether they were relevant to the options case, according to
two people with knowledge of the probe who spoke on condition of anonymity
because it was an active investigation.
Federal agents this week served subpoenas on several of Nicholas' employees,
but not the billionaire himself, according to another person with knowledge
of the matter who spoke on condition of anonymity.
Henry Nicholas has denied those allegations, and also denied the claims in
Kato's suit.
"These absurd allegations seem to be
intended to disrupt the principal focus of my work, post-retirement, which
would be in criminal justice and medical research," he said in a
statement to The Times.
Nicholas met with The Times at his office in Aliso Viejo on Thursday and
again at his $19.5-million home in Newport Coast on Friday, accompanied both
times by lawyers and a public relations advisor.
Nicholas said he had been counseled not to discuss the stock options probe
or the allegations in the civil suit. But he did say that Kato sank into
drug abuse while working for him at Level 7, a music and media company.
"We don't have drug testing," Nicholas said Friday. "We just set the bar so
high you have to be sober to meet it. That was too high, unfortunately, for
Kenji."
In an interview, Kato attorney Joseph Kar acknowledged that his client had
used hard drugs, but said Nicholas introduced him to the practice.
"Before he met Nick, I think the most he had ever done was to smoke
marijuana," Kar said.
Kato, 35, was a Pepperdine
University graduate student in law and business when Nicholas hired him in
1999. The son of former Oxnard Mayor Tsujio
Kato, he met Nicholas through an event-planning business operated by his
brother, Dean Kato, according to records and interviews.
"We would entertain him and his guests, by arranging lavish events, dinners,
concerts, parties fit for only billionaires," Kenji Kato said in a court
filing.
In his lawsuit, Kato alleged that Nicholas and his companies owed him
$150,000 in unpaid wages on his $100-an-hour contract — and that they had
later breached an agreement to settle his claims for $3 million.
In subsequent court filings, Kato
also alleged that Nicholas secretly spiked the drinks of business associates
with drugs, ordered aides to fill balloons with laughing gas to entertain
party guests and left drug paraphernalia strewn about a second Newport Coast
house owned by Nicholas where Level 7 had a recording studio.
Lawsuit: Ex-Broadcom CEO used drugs, prostitutes
Amid ongoing investigation of options backdating at company,
allegations by former employees
draw further attention of federal agencies
By Grant Gross, IDG News Service
July 13, 2007 Talkback E-mail Printer Friendly Reprints
A civil lawsuit accusing Henry Nicholas III, the former president and CEO of
Broadcom Corp., of mistreating employees, using illegal drugs and paying for
prostitutes, has reportedly caught the attention of U.S. law enforcement
officials investigating stock
options backdating at the company.
Fr
Nicholas, who resigned from Broadcom in January 2003, is the target of a
civil lawsuit brought by cousins Kenji and Scott Kato, both former employees
of Nicholas. The lawsuit, filed in November in Superior Court of California
for the County of Los Angeles, alleges that Nicholas and his lawyers reneged
on a settlement for wrongful termination and other claims.
The Wall Street Journal reported Friday that the U.S. Attorney's Office for
the Central District of California, which is investigating stock options
backdating at Broadcom, has begun looking into the Katos' claims. The U.S.
Federal Bureau of Investigation interviewed Kenji Kato in April, and this
week, it began interviewing other Nicholas employees, the news report said.
Nicholas' lawyer, Steven Silverstein, called the allegations "complete and
total nonsense, a fabrication." Kenji and Scott Kato are trying to extort
money from Nicholas, he said.
Asked about the U.S. attorney's interest in the civil case, he said, "What
could this possibly have to do with stock options backdating?"
Kenji Kato's lawyer, Joseph Kar, declined to comment on the U.S. Attorney's
interest in the case. A spokeswoman for the U.S. Attorney's office didn't
immediately return a phone call seeking comment on the investigation.
Broadcom, a chip maker for communications devices, announced in January it
would take a $2.24 billion charge for stock options backdating. Broadcom
said it found options for 232.9 million shares of company stock that had
been backdated, with 9.7 million of those shares going to executive
officers.
Kenji Kato, who describes himself in
court documents as a former personal assistant of Nicholas', said Nicholas
and his lawyers offered him a settlement of more than $2.9 million in
November, then withdrew it. Kato had accused Nicholas of wrongful
termination, breach of contract and infliction of emotional distress, among
other things.
Kenji Kato worked for Nicholas from
October 1999 to April 2006, and during much of that time, Nicholas threw
wild parties and regularly used illegal drugs, such as cocaine, according to
a court filing from May. While at Broadcom,
Nicholas hired prostitutes for clients and for himself, and he spiked
customer drinks with powdered ecstasy pills to lower their "inhibitions and
guard," Kato said in the filing.
Silverstein said the proposed settlement between Nicholas and Kato was part
of a Los Angeles County Sheriff's Department sting operation into the Katos'
extortion attempts. "From the first time we ever heard from those guys, we
knew it was false ... and we contacted police," Silverstein said.
Nicholas' lawyer, Steven Silverstein, didn't immediately return a phone call
seeking comment on the lawsuit. In addition, Kato signed a confidentiality
agreement when working for Nicholas, according to documents filed by Level 7
LLC and The Management Company LLC, two companies owned by Nicholas.
Kato has threatened to make public "certain sensitive private alleged facts
... which he had expressly promised to keep private," the Level 7 court
documents say. "Kato's wrongful conduct by issuing these threats ... will
cause great and irreparable injury to plaintiffs."
Nicholas regularly yelled at employees, and he demanded that Kenji Kato
carry a bag with illegal drugs for him, according to Kenji Kato's filing.
Nicholas also demanded that Kato use drugs along with him, Kato said.
"I was regularly exposed to ... a high degree of debauchery while working
for Nick," he said in his filing. "The first time I used cocaine was when
Nick shoved a tiny spoon up my nose because I was falling asleep, while he
was talking to me. Over time, I got sucked into his extreme lifestyle."
By the end of Kato's employment, Nicholas was using "large quantities" of
illegal drugs, including cocaine and heroin, and had withdrawn from his
friends and family, according to Kato's May filing. Nicholas had stopped
paying Kato, although he still demanded work from him, and when Kato walked
out, Nicholas owed him $150,000 in back pay, the court documents say.
Nicholas had promised Kato employee benefits and Broadcom stock options, but
he never delivered, according to Kato's filing.
This story was updated Billionaire accused of building hidden sex and drugs
den
By Leonard Doyle in Washington
Published: 19 July 2007
Henry T Nicholas III was, for a brief period, one of the richest men in
America. A patron of the Orange County arts scene, he had a trophy wife and
enjoyed playing Rod Stewart numbers at full volume from the steps of his
mansion.
The 6ft 6ins engineer founded the company Broadcom in 1991, making the
innards of cable TV boxes at his Redondo Beach apartment. When it floated in
the go-go years of the internet boom, his shares went up in value 40 times
and he soon acquired the trappings of the super rich: private jets, a
Lamborghini and a mansion in Laguna Hills with its own equestrian estate
and, court documents claim, his personal brothel, hidden in an underground
grotto.
The grotto was reached by hidden doors with secret levers, leading to
tunnels and a 2,000sq-ft underground sports bar called "Nick's Café".
According to claims in court papers, this was a "secret and convenient
lair", to cater for "Mr Nicholas's manic obsession with prostitutes" and his
"addiction to cocaine and ecstasy".
He used his private jet to pick up prostitutes as far away as New Orleans,
Chicago, Las Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends", according to documents filed with Orange County Superior
Court. "He provided his guests with transportation and cocaine, ecstasy,
methamphetamines, marijuana, mushrooms, and nitrous oxide [laughing gas]".
In January 2003, Mr Nicholas quit Broadcom, saying he intended to spend more
time with his children and tend to his marriage. Among the many legal
troubles he now faces is a divorce battle with his wife Stacey, with whom he
controls $1.1bn in Broadcom shares.
Mr Nicholas apparently told his wife about the underground passageways and
rooms under their mansion when work began. But the construction was said to
be far more elaborate than she imagined and ultimately
cost $30m to build
over three years.
In August 2000, Mr Nicholas took his wife to Hawaii for a week while work
was being finished. The contractors were "threatened with financial ruin -
whatever it took - if they failed to complete the task within a week", it is
claimed.
Equestrian estate
 |
But the noise and the sight of armed guards blocking public horse-trails
near the site led neighbours to complain. The authorities shut the building
site. They did not know "the [underground] room ceiling was covered over so
it was not observable from above ground", according to the contractors.
|
At the time, Mr Nicholas told the Los Angeles Times the structure was "a
pump-house" for run-off water. The contractors say the underground site,
called Ponderosa, "was infamous for excessive extravagance, its sex rooms
and its million-dollar sound equipment", the documents claimed. The
allegations were made by a construction company which says it was not paid.
The claims have been denounced as falsehoods by Mr Nicholas's lawyer but
echo other claims made by Kenji Kato, Mr Nicholas's former assistant. Mr
Kato says he is owed $150,000 in back wages, and alleges serial drug use and
other debauchery at the mansion.
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- Sordid allegations add to billionaire's woes
Flush with wealth from Broadcom Corp.'s 1998 public stock offering, computer
chip magnate Henry T. Nicholas III made a few additions to his equestrian estate
in Laguna Hills: hidden doors and secret
levers, an underground grotto, tunnels and a 2,000-square-foot sports bar he
called "Nick's Cafe."
But there was more, according to a claim
made in court documents: plans for a "secret and convenient lair" with hidden
entries for Nicholas to indulge his "manic obsession with prostitutes" and
"addiction to cocaine and Ecstasy."
--------------------------------------------------------------------------------
FOR THE RECORD:
Nicholas lawsuit: An article Wednesday in Business about Broadcom co-founder
Henry T. Nicholas III quoted attorney Joseph Kar as saying his client, Kenji
Kato, was unfamiliar with allegations in court papers against Nicholas by
contractor Roman James but knew of the court case because "Nicholas had
mentioned it infrequently." Kar said Nicholas mentioned James infrequently, not
the case. —
--------------------------------------------------------------------------------
The filing in Orange County Superior
Court added that Nicholas had the interior built in warehouse space nearby,
which became his "personal brothel" until his wife caught him having sex with a
prostitute there.
The allegations by a construction team, denounced as fabrications by Nicholas'
lawyer, echoed others in a recently surfaced lawsuit filed late last year by
Kenji Kato, a Nicholas assistant from 1999 to 2006.
In his suit, Kato claims that Nicholas and his companies owe him $150,000 in
back wages. Filings in the suit allege
drug use and debauchery at a Newport Coast home owned by Nicholas, who denies
the accusations.
Responding in a lawsuit pending in Orange County Superior Court, Nicholas has
alleged that Kato is bound by confidentiality agreements that bar him from
disclosing information about the billionaire and his businesses.
Kato's allegations are being examined by
federal authorities probing Nicholas' role in the manipulation of stock options
at Broadcom,
according to people with knowledge of the investigation. Through his
attorney, Nicholas has denied any wrongdoing.
Nicholas, 47, co-founded Broadcom in 1991 and served as its chief executive
until 2003. Broadcom's success made him one of the nation's richest men, and he
has given millions to schools, the Orange County Performing Arts Center and
other causes.
The alleged plans for the covert
underground hideaway, to be connected to Nicholas' Laguna Hills home, were
detailed by Roman James of Newport Beach, the lead contractor on the project,
and six other contractors, engineers and construction workers who worked on it
and filed a lawsuit against Nicholas in 2002.
The construction team accused Nicholas of failing to pay millions of dollars for
work performed between April 1998 and April 2002. Nicholas was said to have used
"manipulation, lies, intimidation and even death threats" to pressure "nearly
every contractor and vendor" on the project to perform extra work without pay
"at warp speed."
The allegations were contained in a draft complaint that was prepared but not
filed as part of the contractors' lawsuit, which was resolved in a confidential
settlement in 2002.
The draft complaint, however, was attached in 2005 as a supporting document to a
lawsuit against the attorney for James, James R. Traut, by another man who
sought a larger share of the 2002 settlement.
There was a 2006 judgment in that case, but the outcome was not clear in court
documents and attorneys involved in that case could not be reached for comment.
Nicholas was not named in that case.
The Times obtained the draft complaint from the Orange County Superior Court
file — and blanket denials of its allegations from the Nicholas camp — on
Tuesday.
Nicholas attorney Steven A. Silverstein said Tuesday that "all of the
allegations are denied" and charged that the similarity between the Roman and
Kato cases was not coincidental.
"Basically, where Kenji got his idea for his extortion came from Roman James,"
Silverstein said, contending that Kato was familiar with the previous case.
James could not be reached Tuesday. His lawyer, Traut, did not return repeated
messages left at his Santa Ana office.
In court filings in his lawsuit, Kato said Nicholas made him
oversee supplies of cocaine and other
drugs, pay prostitutes from a "petty cash" fund and conceal his boss' illicit
activities.
Kato's lawyer, Joseph Kar, said his client knew of the James case only because
"Dr. Nicholas had mentioned it infrequently." But Kar said he and his client
"have not seen that complaint" and were unfamiliar with its allegations.
Any similarity in the lawsuits "goes to corroborate the abuse and misbehaving of
Mr. Nicholas" detailed in Kato's court papers, Kar said.
Nicholas made no secret of the underground passageways and rooms under his
Laguna Hills home, but the filing by James contended the subterranean complex
was more elaborate than even Stacey Nicholas was aware of and ultimately cost
$30 million over three years.
Nicholas took his wife to Hawaii for a week in August 2000 while work on his
secret chamber was being completed, the filing claimed. Stacey Nicholas has
since filed for divorce.
"Plaintiffs were promised payment and/or threatened with financial ruin —
whatever it took — if they failed to complete the task within a week," the draft
complaint said, and hundreds of workers began toiling 18 hours a day to excavate
and pour concrete.
The noise and presence of armed guards
hired to block access to community horse trails near the project prompted
neighbors to complain to Laguna Hills authorities, who discovered the work was
being performed without a permit and shut it down, "although the room ceiling
was covered over so it was not observable from above ground," the contractors
said.
In a September 2000 Times story about the dispute, Nicholas said the newest
underground structure was "a pump house" to handle water runoff from the horse
trails.
The draft complaint disputed that account and claimed the new construction was
tied to the alleged separate underground facility being built by Nicholas.
It said Nicholas, anticipating he would
eventually obtain a permit from the city "to complete his lair," implemented a
backup plan, arranging "to completely fabricate the interior" of the hideaway at
a Laguna Niguel
warehouse.
The location, referred to as the Pond or the Ponderosa, "was infamous for its
excessive extravagance, its sex rooms and its million-dollar sound equipment,"
the document alleged.
Nicholas had his private jet pick up prostitutes in New Orleans, Chicago, Las
Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends," the draft
complaint said. "He provided his guests
with transportation and cocaine, Ecstasy, methamphetamines, marijuana,
mushrooms, and nitrous oxide [laughing gas]" — and even arranged for his private
helicopter to land at a nearby hospital helipad, it said.
The lawsuit alleged that Nicholas required pledges of loyalty and secrecy from
the contractors and at one point threatened James' life.
Nicholas, in an interview with The Times last week about the Kato suit, said the
allegations of drug use against him were especially absurd because he had been
recognized by authorities for his efforts to boost law enforcement.
LOS ANGELES - The co-founder of semiconductor maker Broadcom Corp., under
scrutiny in a federal stock options
probe, was accused seven years ago of building an underground hideaway at his
estate to indulge in drugs and sex with prostitutes, according to court
documents.
ADVERTISEMENT
In a draft complaint made against Henry T. Nicholas III, a construction crew
claimed the billionaire failed to pay
them millions of dollars for work performed between 1998 and 2002, and used
"manipulation, lies, intimidation, and even death threats" when anyone
threatened to quit.
The illegal network of tunnels and rooms
underneath Nicholas' Laguna Hills estate was kept secret from his wife and city
officials, the documents said.
The purpose of one secret room was to allow Nicholas to "indulge his appetite
for illegal drugs and sex with prostitutes," the crew claimed.
The allegations in the draft complaint were not filed with the crew's
lawsuit against Nicholas in 2002, which was later resolved in a
confidential settlement
. However, the complaint was attached in 2005 as a supporting document to a
lawsuit filed in Orange County Superior Court by a man seeking a larger share of
the settlement.
Some of the allegations were similar to those made by former Nicholas employee
Nicholas' attorney Steven A. Silverstein has characterized Kato's claims as an
extortion attempt and said of the construction crew complaint, "all of the
allegations are denied."
Nicholas, 47, also has been identified by an internal Broadcom audit as bearing
"significant responsibility" for the way stock options were granted and dated
during the high-flying days of the Irvine-based technology company.
The company said it found evidence that Nicholas, who left Broadcom in 2003,
personally approved of options dates that led the company to restate earnings
and record $2.22 billion in non-cash expenses. Another Nicholas attorney, John
W. Spiegel, has said his client did not knowingly engage in selecting grant
dates after the fact.
Riding the high-tech wave of the 1990s, Henry T. Nicholas III became one
of the nation's richest people, a brash and innovative billionaire who gave
millions to charity and made hundreds of his employees wealthy with stock
options.
A decade later, the 47-year-old
faces a federal investigation and accusations from a former employee
that threaten to tarnish his image as one of the tech industry's leading
entrepreneurs and one of Orange County's most generous philanthropists.
Federal authorities are probing Nicholas' role in the manipulation of stock
option grants at Broadcom Corp., the Irvine company he co-founded and led
until 2003. The inquiry follows an internal company review that found
Nicholas bore "significant
responsibility" for the so-called backdating of option grants.
In conducting their probe, federal investigators have taken note of a civil
suit filed in Los Angeles County Superior Court by Kenji Kato, who worked
for Nicholas as an administrative assistant for nearly seven years beginning
in 1999.
In court filings, Kato alleged that
Nicholas required him to oversee supplies of cocaine and other drugs, pay
prostitutes from a "petty cash" fund and conceal his boss' "extracurricular
activities," including his alleged drug use, from his wife and others.
Nicholas' lawyer called the allegations "crazy" and contended the civil suit
was a $9-million extortion scheme. Los Angeles County sheriff's detectives
investigated the extortion allegation and the case was under review by the
district attorney, officials said.
Federal prosecutors, meanwhile, were examining the issues in the civil case
to determine whether they were relevant to the options case, according to
two people with knowledge of the probe who spoke on condition of anonymity
because it was an active investigation.
Federal agents this week served subpoenas on several of Nicholas' employees,
but not the billionaire himself, according to another person with knowledge
of the matter who spoke on condition of anonymity.
Henry Nicholas has denied those allegations, and also denied the claims in
Kato's suit.
"These absurd allegations seem to be
intended to disrupt the principal focus of my work, post-retirement, which
would be in criminal justice and medical research," he said in a
statement to The Times.
Nicholas met with The Times at his office in Aliso Viejo on Thursday and
again at his $19.5-million home in Newport Coast on Friday, accompanied both
times by lawyers and a public relations advisor.
Nicholas said he had been counseled not to discuss the stock options probe
or the allegations in the civil suit. But he did say that Kato sank into
drug abuse while working for him at Level 7, a music and media company.
"We don't have drug testing," Nicholas said Friday. "We just set the bar so
high you have to be sober to meet it. That was too high, unfortunately, for
Kenji."
In an interview, Kato attorney Joseph Kar acknowledged that his client had
used hard drugs, but said Nicholas introduced him to the practice.
"Before he met Nick, I think the most he had ever done was to smoke
marijuana," Kar said.
Kato, 35, was a Pepperdine
University graduate student in law and business when Nicholas hired him in
1999. The son of former Oxnard Mayor Tsujio
Kato, he met Nicholas through an event-planning business operated by his
brother, Dean Kato, according to records and interviews.
"We would entertain him and his guests, by arranging lavish events, dinners,
concerts, parties fit for only billionaires," Kenji Kato said in a court
filing.
In his lawsuit, Kato alleged that Nicholas and his companies owed him
$150,000 in unpaid wages on his $100-an-hour contract — and that they had
later breached an agreement to settle his claims for $3 million.
In subsequent court filings, Kato
also alleged that Nicholas secretly spiked the drinks of business associates
with drugs, ordered aides to fill balloons with laughing gas to entertain
party guests and left drug paraphernalia strewn about a second Newport Coast
house owned by Nicholas where Level 7 had a recording studio.
Lawsuit: Ex-Broadcom CEO used drugs, prostitutes
Amid ongoing investigation of options backdating at company,
allegations by former employees
draw further attention of federal agencies
By Grant Gross, IDG News Service
July 13, 2007 Talkback E-mail Printer Friendly Reprints
A civil lawsuit accusing Henry Nicholas III, the former president and CEO of
Broadcom Corp., of mistreating employees, using illegal drugs and paying for
prostitutes, has reportedly caught the attention of U.S. law enforcement
officials investigating stock
options backdating at the company.
Fr
Nicholas, who resigned from Broadcom in January 2003, is the target of a
civil lawsuit brought by cousins Kenji and Scott Kato, both former employees
of Nicholas. The lawsuit, filed in November in Superior Court of California
for the County of Los Angeles, alleges that Nicholas and his lawyers reneged
on a settlement for wrongful termination and other claims.
The Wall Street Journal reported Friday that the U.S. Attorney's Office for
the Central District of California, which is investigating stock options
backdating at Broadcom, has begun looking into the Katos' claims. The U.S.
Federal Bureau of Investigation interviewed Kenji Kato in April, and this
week, it began interviewing other Nicholas employees, the news report said.
Nicholas' lawyer, Steven Silverstein, called the allegations "complete and
total nonsense, a fabrication." Kenji and Scott Kato are trying to extort
money from Nicholas, he said.
Asked about the U.S. attorney's interest in the civil case, he said, "What
could this possibly have to do with stock options backdating?"
Kenji Kato's lawyer, Joseph Kar, declined to comment on the U.S. Attorney's
interest in the case. A spokeswoman for the U.S. Attorney's office didn't
immediately return a phone call seeking comment on the investigation.
Broadcom, a chip maker for communications devices, announced in January it
would take a $2.24 billion charge for stock options backdating. Broadcom
said it found options for 232.9 million shares of company stock that had
been backdated, with 9.7 million of those shares going to executive
officers.
Kenji Kato, who describes himself in
court documents as a former personal assistant of Nicholas', said Nicholas
and his lawyers offered him a settlement of more than $2.9 million in
November, then withdrew it. Kato had accused Nicholas of wrongful
termination, breach of contract and infliction of emotional distress, among
other things.
Drug clients
Kenji Kato worked for Nicholas from
October 1999 to April 2006, and during much of that time, Nicholas threw
wild parties and regularly used illegal drugs, such as cocaine, according to
a court filing from May. While at Broadcom,
Nicholas hired prostitutes for clients and for himself, and he spiked
customer drinks with powdered ecstasy pills to lower their "inhibitions and
guard," Kato said in the filing.
Silverstein said the proposed settlement between Nicholas and Kato was part
of a Los Angeles County Sheriff's Department sting operation into the Katos'
extortion attempts. "From the first time we ever heard from those guys, we
knew it was false ... and we contacted police," Silverstein said.
Nicholas' lawyer, Steven Silverstein, didn't immediately return a phone call
seeking comment on the lawsuit. In addition, Kato signed a confidentiality
agreement when working for Nicholas, according to documents filed by Level 7
LLC and The Management Company LLC, two companies owned by Nicholas.
Kato has threatened to make public "certain sensitive private alleged facts
... which he had expressly promised to keep private," the Level 7 court
documents say. "Kato's wrongful conduct by issuing these threats ... will
cause great and irreparable injury to plaintiffs."
Nicholas regularly yelled at employees, and he demanded that Kenji Kato
carry a bag with illegal drugs for him, according to Kenji Kato's filing.
Nicholas also demanded that Kato use drugs along with him, Kato said.
"I was regularly exposed to ... a high degree of debauchery while working
for Nick," he said in his filing. "The first time I used cocaine was when
Nick shoved a tiny spoon up my nose because I was falling asleep, while he
was talking to me. Over time, I got sucked into his extreme lifestyle."
By the end of Kato's employment, Nicholas was using "large quantities" of
illegal drugs, including cocaine and heroin, and had withdrawn from his
friends and family, according to Kato's May filing. Nicholas had stopped
paying Kato, although he still demanded work from him, and when Kato walked
out, Nicholas owed him $150,000 in back pay, the court documents say.
Nicholas had promised Kato employee benefits and Broadcom stock options, but
he never delivered, according to Kato's filing.
This story was updated Billionaire accused of building hidden sex and drugs
den
By Leonard Doyle in Washington
Published: 19 July 2007
Henry T Nicholas III was, for a brief period, one of the richest men in
America. A patron of the Orange County arts scene, he had a trophy wife and
enjoyed playing Rod Stewart numbers at full volume from the steps of his
mansion.
The 6ft 6ins engineer founded the company Broadcom in 1991, making the
innards of cable TV boxes at his Redondo Beach apartment. When it floated in
the go-go years of the internet boom, his shares went up in value 40 times
and he soon acquired the trappings of the super rich: private jets, a
Lamborghini and a mansion in Laguna Hills with its own equestrian estate
and, court documents claim, his personal brothel, hidden in an underground
grotto.
The grotto was reached by hidden doors with secret levers, leading to
tunnels and a 2,000sq-ft underground sports bar called "Nick's Café".
According to claims in court papers, this was a "secret and convenient
lair", to cater for "Mr Nicholas's manic obsession with prostitutes" and his
"addiction to cocaine and ecstasy".
He used his private jet to pick up prostitutes as far away as New Orleans,
Chicago, Las Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends", according to documents filed with Orange County Superior
Court. "He provided his guests with transportation and cocaine, ecstasy,
methamphetamines, marijuana, mushrooms, and nitrous oxide [laughing gas]".
In January 2003, Mr Nicholas quit Broadcom, saying he intended to spend more
time with his children and tend to his marriage. Among the many legal
troubles he now faces is a divorce battle with his wife Stacey, with whom he
controls $1.1bn in Broadcom shares.
Mr Nicholas apparently told his wife about the underground passageways and
rooms under their mansion when work began. But the construction was said to
be far more elaborate than she imagined and ultimately cost $30m to build
over three years.
In August 2000, Mr Nicholas took his wife to Hawaii for a week while work
was being finished. The contractors were "threatened with financial ruin -
whatever it took - if they failed to complete the task within a week", it is
claimed.
But the noise and the sight of armed guards blocking public horse-trails
near the site led neighbours to complain. The authorities shut the building
site. They did not know "the [underground] room ceiling was covered over so
it was not observable from above ground", according to the contractors.
At the time, Mr Nicholas told the Los Angeles Times the structure was "a
pump-house" for run-off water. The contractors say the underground site,
called Ponderosa, "was infamous for excessive extravagance, its sex rooms
and its million-dollar sound equipment", the documents claimed. The
allegations were made by a construction company which says it was not paid.
The claims have been denounced as falsehoods by Mr Nicholas's lawyer but
echo other claims made by Kenji Kato, Mr Nicholas's former assistant. Mr
Kato says he is owed $150,000 in back wages, and alleges serial drug use and
other debauchery at the mansion.
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Related Stories
- Sordid allegations add to billionaire's woes
Flush with wealth from Broadcom Corp.'s 1998 public stock offering, computer
chip magnate Henry T. Nicholas III made a few additions to his equestrian estate
in Laguna Hills: hidden doors and secret
levers, an underground grotto, tunnels and a 2,000-square-foot sports bar he
called "Nick's Cafe."
But there was more, according to a claim
made in court documents: plans for a "secret and convenient lair" with hidden
entries for Nicholas to indulge his "manic obsession with prostitutes" and
"addiction to cocaine and Ecstasy."
--------------------------------------------------------------------------------
FOR THE RECORD:
Nicholas lawsuit: An article Wednesday in Business about Broadcom co-founder
Henry T. Nicholas III quoted attorney Joseph Kar as saying his client, Kenji
Kato, was unfamiliar with allegations in court papers against Nicholas by
contractor Roman James but knew of the court case because "Nicholas had
mentioned it infrequently." Kar said Nicholas mentioned James infrequently, not
the case. —
--------------------------------------------------------------------------------
The filing in Orange County Superior
Court added that Nicholas had the interior built in warehouse space nearby,
which became his "personal brothel" until his wife caught him having sex with a
prostitute there.
The allegations by a construction team, denounced as fabrications by Nicholas'
lawyer, echoed others in a recently surfaced lawsuit filed late last year by
Kenji Kato, a Nicholas assistant from 1999 to 2006.
In his suit, Kato claims that Nicholas and his companies owe him $150,000 in
back wages. Filings in the suit allege
drug use and debauchery at a Newport Coast home owned by Nicholas, who denies
the accusations.
Responding in a lawsuit pending in Orange County Superior Court, Nicholas has
alleged that Kato is bound by confidentiality agreements that bar him from
disclosing information about the billionaire and his businesses.
Kato's allegations are being examined by
federal authorities probing Nicholas' role in the manipulation of stock options
at Broadcom,
according to people with knowledge of the investigation. Through his
attorney, Nicholas has denied any wrongdoing.
Nicholas, 47, co-founded Broadcom in 1991 and served as its chief executive
until 2003. Broadcom's success made him one of the nation's richest men, and he
has given millions to schools, the Orange County Performing Arts Center and
other causes.
The alleged plans for the covert
underground hideaway, to be connected to Nicholas' Laguna Hills home, were
detailed by Roman James of Newport Beach, the lead contractor on the project,
and six other contractors, engineers and construction workers who worked on it
and filed a lawsuit against Nicholas in 2002.
The construction team accused Nicholas of failing to pay millions of dollars for
work performed between April 1998 and April 2002. Nicholas was said to have used
"manipulation, lies, intimidation and even death threats" to pressure "nearly
every contractor and vendor" on the project to perform extra work without pay
"at warp speed."
The allegations were contained in a draft complaint that was prepared but not
filed as part of the contractors' lawsuit, which was resolved in a confidential
settlement in 2002.
The draft complaint, however, was attached in 2005 as a supporting document to a
lawsuit against the attorney for James, James R. Traut, by another man who
sought a larger share of the 2002 settlement.
There was a 2006 judgment in that case, but the outcome was not clear in court
documents and attorneys involved in that case could not be reached for comment.
Nicholas was not named in that case.
The Times obtained the draft complaint from the Orange County Superior Court
file — and blanket denials of its allegations from the Nicholas camp — on
Tuesday.
Nicholas attorney Steven A. Silverstein said Tuesday that "all of the
allegations are denied" and charged that the similarity between the Roman and
Kato cases was not coincidental.
"Basically, where Kenji got his idea for his extortion came from Roman James,"
Silverstein said, contending that Kato was familiar with the previous case.
James could not be reached Tuesday. His lawyer, Traut, did not return repeated
messages left at his Santa Ana office.
In court filings in his lawsuit, Kato said Nicholas made him
oversee supplies of cocaine and other
drugs, pay prostitutes from a "petty cash" fund and conceal his boss' illicit
activities.
Kato's lawyer, Joseph Kar, said his client knew of the James case only because
"Dr. Nicholas had mentioned it infrequently." But Kar said he and his client
"have not seen that complaint" and were unfamiliar with its allegations.
Any similarity in the lawsuits "goes to corroborate the abuse and misbehaving of
Mr. Nicholas" detailed in Kato's court papers, Kar said.
Nicholas made no secret of the underground passageways and rooms under his
Laguna Hills home, but the filing by James contended the subterranean complex
was more elaborate than even Stacey Nicholas was aware of and ultimately cost
$30 million over three years.
Nicholas took his wife to Hawaii for a week in August 2000 while work on his
secret chamber was being completed, the filing claimed. Stacey Nicholas has
since filed for divorce.
"Plaintiffs were promised payment and/or threatened with financial ruin —
whatever it took — if they failed to complete the task within a week," the draft
complaint said, and hundreds of workers began toiling 18 hours a day to excavate
and pour concrete.
The noise and presence of armed guards hired to block access to community horse
trails near the project prompted neighbors to complain to Laguna Hills
authorities, who discovered the work was being performed without a permit and
shut it down, "although the room ceiling was covered over so it was not
observable from above ground," the contractors said.
In a September 2000 Times story about the dispute, Nicholas said the newest
underground structure was "a pump house" to handle water runoff from the horse
trails.
The draft complaint disputed that account and claimed the new construction was
tied to the alleged separate underground facility being built by Nicholas.
It said Nicholas, anticipating he would
eventually obtain a permit from the city "to complete his lair," implemented a
backup plan, arranging "to completely fabricate the interior" of the hideaway at
a Laguna Niguel
warehouse.
The location, referred to as the Pond or the Ponderosa, "was infamous for its
excessive extravagance, its sex rooms and its million-dollar sound equipment,"
the document alleged.
Nicholas had his private jet pick up prostitutes in New Orleans, Chicago, Las
Vegas and Los Angeles "and bring them back to the Pond for his
rock star friends," the draft
complaint said. "He provided his guests
with transportation and cocaine, Ecstasy, methamphetamines, marijuana,
mushrooms, and nitrous oxide [laughing gas]" — and even arranged for his private
helicopter to land at a nearby hospital helipad, it said.
The lawsuit alleged that Nicholas required pledges of loyalty and secrecy from
the contractors and at one point threatened James' life.
Nicholas, in an interview with The Times last week about the Kato suit, said the
allegations of drug use against him were especially absurd because he had been
recognized by authorities for his efforts to boost law enforcement.