Many Nicholas files sealed

A federal judge on Monday granted a Los Angeles Times request to unseal some documents in the drug prosecution of Newport Beach billionaire Henry T. Nicholas III but kept others secret on grounds they might prejudice an ongoing grand jury investigation that could produce additional charges in the case.

“I feel very, very uncomfortable closing the proceedings and shutting the press out in this case,” said U.S. District Judge Cormac J. Carney in Santa Ana.

He ruled that 11 documents related to a list of government witnesses that Nicholas is barred from contacting would be unsealed this week. The list itself already had been made public.

But after hearing from government and defense lawyers that 12 other filings contain references to a Nicholas employee who has not yet testified to the grand jury, Carney told Times attorney Alonzo B. Wickers IV that he would keep them sealed “out of an abundance of caution.”

Carney said the grand jury might indict other defendants or bring additional charges against Nicholas, 49, co-founder of Irvine computer chip designer Broadcom Corp.

Nicholas has pleaded not guilty to two indictments handed up last June by the federal grand jury in Santa Ana.

The four-count drug case accuses him of maintaining homes and a warehouse for “using and distributing” cocaine, ecstasy and methamphetamine. Among other things, he is alleged to have secretly slipped drugs into the drinks of business associates to gain competitive advantage.

A separate 21-count fraud and conspiracy indictment accuses Nicholas and former Broadcom finance chief William J. Ruehle of misdating billions of dollars in Broadcom stock options to secretly reward employees. Ruehle also has pleaded not guilty; Broadcom co-founder Henry Samueli has pleaded guilty to lying to the Securities and Exchange Commission about his role in the options awards.

The options fraud case is scheduled to be heard next spring, with the drug case to follow in November 2009.

The witness who has not yet testified to the grand jury was identified in court as a Nicholas employee for whom the billionaire is paying legal fees. Attorneys said the sealed filings also identify a second witness who has given grand jury testimony. Nicholas also is a defendant in a federal securities-fraud lawsuit by the SEC and has battled his former wife, Stacey, in the probate and divorce divisions of Orange County Superior Court. Stacey Nicholas last week sought to have him removed as co-trustee of their family trust for allegedly squandering $60 million.

In addition to the secret filings in the drug case, numerous documents have been sealed in the options fraud case and Samueli’s plea to misleading the SEC. In Orange County divorce court, The Times has challenged the sealing of the entire Nicholas divorce case.

Carney granted a request from Times lawyer Wickers to record clearer reasons on the public docket when he agrees to seal documents. The judge said the court’s current practice -- simply entering the cryptic descriptions on envelopes containing the documents -- “has been constitutionally deficient.”

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scott.reckard@latimes.com