O.C. tech billionaire indicted

Lawyers for both men denied the allegations.

"Dr. Nicholas will contest these charges vigorously," his lead attorney, Brendan V. Sullivan Jr. of Washington, D.C., said in a statement. "He is confident that he will be fully vindicated."

Ruehle's lawyer, Richard Marmaro of Los Angeles, said Ruehle "looks forward to the opportunity to clear his good name in a court of law."

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Under close watch

At an afternoon hearing in U.S. District Court in Santa Ana, Nicholas sat quietly in a jury box with criminal defendants from other cases, the unbuttoned sleeves of his dress shirt pulled over his handcuffs. He occasionally scowled as his lawyers and prosecutors argued over whether he should be held without bail as a flight risk and a threat to the community.

U.S. Magistrate Judge Arthur Nakazato ordered Nicholas freed on bail of $3.4 million secured by property pledged by his mother, who was in court Thursday, and a group of friends.

Nakazato ordered that Nicholas be confined to a Malibu drug treatment facility, with electronic monitoring, and that his two private planes be disabled. He warned Nicholas that he would be arrested if he violated any terms of his release, which also stipulate random drug tests.

He and Ruehle, who also appeared in court Thursday and was freed on a $2-million bond, are to be arraigned June 16.

The indictment that names both men details a conspiracy to backdate stock options to make them worth more to employees without having to report the expense to shareholders.

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An expensive fix

To correct its books, Broadcom last year recorded $2.2 billion in previously unreported expenses -- the biggest such adjustment among the more than 200 firms whose options practices have come under scrutiny.

"By fraudulently backdating and repricing option grants, defendants and their co-conspirators deceived Broadcom's shareholders, potential shareholders and auditors as to the nature and amount Broadcom truly was compensating its employees and officers," the indictment alleged.

Stock options were routinely used to recruit or retain employees during the high-tech boom of the late 1990s.

The indictment details one such arrangement, when Nicholas in June 1999 hired an engineer identified in the indictment by his initials, M.N.

The then-CEO allegedly told M.N. that the 120,000 options he was to get would be backdated to May 25 of that year, increasing their value. After starting work, M.N. discovered that the grant date had been recorded as May 28, which diminished their value.