Stock Option Backdating Issue Gregory Reyes

1 stock option backdating issue

1.1 charges
1.2 first trial
1.3 appeal
1.4 second trial , appeal
1.5 civil proceedings

stock option backdating issue
charges

in june 2005, brocade announced u.s. securities , exchange commission had undertaken investigation company stock option accounting. in august 2006, u.s. government indicted reyes on 12 counts of securities fraud, 2 of later dropped.

first trial

reyes s trial began on june 18, 2007, making first criminal trial in backdating prosecution considered before jury.

in trial, reyes stated had no intent deceive anyone, , decisions relied largely in faith on accuracy of documentation provided brocade s finance department, incorrectly accounted stock options in brocade s financial statements signed in faith , belief had been accounted for.

elizabeth moore, key witness reyes s conviction , employee of brocade’s finance department called during proceedings, testified neither nor other members of finance department had knowledge of backdating or fraudulent occurrences within organization. after trial’s conclusion, however, moore recanted testimony, claiming had been bullied , pressured prosecution give false testimony. in letter fortune magazine told editor she, other high-ranking members of finance department, had been aware of practice of backdating stock options rank-and-file employees.

moore s conflicting statements not disclosed during trial, , prosecutor adam reeves made numerous statements jury using moore s testimony support argument reyes had deceived brocade’s finance department; presented diagram illustrate no 1 in finance department aware of backdating; made statements in closing arguments claiming employees of finance department did not have idea backdating had occurred, adding government’s theory, based on investigational findings, supported conclusion.

reyes filed motion new trial on grounds of prosecutorial misconduct, denied district court on january 16, 2008, reyes found guilty of 10 counts of fraud , conspiracy, including falsifying corporate accounting books , records, , participating in stock options backdating scheme. reyes sentenced 21 months in prison in addition $15 million fine, making him first executive convicted of concealment of stock options backdating.

on august 11, 2007 reyes convicted on 10 counts of illegally backdating stock options while serving ceo of brocade. in january 2008, sentenced 21 months in prison , received $15 million fine. u.s. district judge charles r. breyer, sentencing judge, refused grant defense request sentence of no more 13 months, served in halfway house rather prison.

appeal

in august 2009, ninth circuit court of appeals reversed reyes s conviction due prosecutorial misconduct in making false assertion of material fact in closing argument jury. in october 2009, federal prosecutors requested ninth circuit strike finding of prosecutorial misconduct, declined request court reverse judgment itself; request denied november 6. in december 2009, northern california legal newspaper recorder reported prosecutors had reached decision retry reyes.

in appeal, national association of criminal defense lawyers had supported reyes amicus brief urging reversal. reyes represented in appeal former u.s. solicitor general seth waxman.

second trial , appeal

reyes s second backdating trial (or retrial) commenced on february 22, 2010, in u.s. district judge charles breyer s court room. reyes charged 1 count of falsifying books , records, 4 counts of lying auditors, 4 counts of security fraud, , 1 count of conspiracy.

on march 26, 2010, jury found reyes guilty on 9 charges , acquitted on conspiracy charge. reyes s attorney stated reyes file appeal. on june 24, 2010, reyes sentenced 18 months incarceration , $15 million fine. reyes incarcerated @ taft correctional institution in taft, california; released on december 29, 2011. appealed second conviction court of appeals ninth circuit, heard oral argument on may 10, 2011. court affirmed conviction october 13. on february 10, 2012, reyes petitioned u.s. supreme court writ of certiorari, asking court review case. petition denied following month.

civil proceedings

in addition criminal proceeding, reyes has been named in several civil lawsuits in state , federal courts, stemming backdating, including 1 federal suit filed u.s. securities , exchange commission, settled in august 2011 $845,000. reyes settled 1 of other suits, derivative suit brought brocade shareholders on behalf of company, in june 2009, reported $12.5 million.