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.

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.

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 US$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.

The IDG News Service is a Network World affiliate.

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