updated 7/19/2007 1:24:47 PM ET 2007-07-19T17:24:47

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.

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 Kenji Kato, who claimed Nicholas took cocaine, ecstasy and heroin and hired prostitutes for clients. Kato, who said he served as Nicholas’ bodyguard and personal assistant for seven years, is seeking $3 million plus damages for his resignation due to what he says was a hostile workplace.

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.

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