updated 6/16/2008 3:50:01 PM ET 2008-06-16T19:50:01

Co-founder Henry T. Nicholas III of Broadcom Inc. pleaded not guilty Monday to federal drug and securities fraud charges alleging wrongdoing inside and outside the microprocessor company.

The 48-year-old billionaire entered the pleas to 21 counts contained in two indictments unsealed June 5.

One indictment details what authorities claim was one of the largest cases ever involving improper accounting for stock-option backdating that allegedly took place while Nicholas led Broadcom, which makes microchips for cell phones and broadband Internet devices.

The other accuses him of slipping ecstasy into the drinks of business associates, maintaining a drug warehouse and concealing his illegal conduct with bribes and death threats.

Former Broadcom CFO William J. Ruehle pleaded not guilty to 21 securities fraud charges at the same hearing Monday in U.S. District Court in Santa Ana.

A trial date was set for July 29. Nicholas remains free on a $3.3 million bond, while Ruehle is free on a bond of $2.6 million.

Nicholas' two cases will be heard by different U.S. district judges.

Both defendants left court without commenting to the media.

Ruehle, 66, is accused of filing false statements with the SEC, committing wire fraud and falsely certifying financial reports. He was not charged with any drug counts.

He could face up to 370 years in prison if convicted of all the charges against him.

Nicholas faces a maximum combined sentence of 20 years for the drug charges and up to 340 years in prison for the stock backdating counts.

Backdating stock options, which often are granted as hiring and retention incentives, is legal. Companies across the country have run into trouble when they failed to account for the true cost of the backdating because omitting it sometimes inflated the companies' income.

U.S. Attorney Thomas P. O'Brien has said the case against Nicholas and Ruehle reveals the importance of maintaining the transparency of financial markets.

O'Brien alleged that Broadcom officials tried to manipulate the market and create a false picture of the Irvine-based company's finances.

Broadcom had to restate its financial results in January 2007 because of the scheme and reported more than $2 billion in compensation expenses it hadn't accounted for.

Nicholas served as CEO and president from Broadcom's inception until he resigned in 2003. Ruehle joined the company in 1997 as vice president and chief financial officer and retired in 2006.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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