Thursday, July 20, 2006

DOJ Charges Reyes In Stock Options Backdating

The United States Attorney's Office for the Northern District of California and the SEC announced this afternoon that the agencies are charging former Brocade CEO and Chairman Greg Reyes with both criminal and civil securities fraud. The separate suits charge that Reyes and former Brocade vice President of Human Resources routinely backdated stock options grants to give employees favorably priced options without recording necessary compensation expense. The Attorney General and the SEC said that this among the first cases involving manipulation of stock option grants. The criminal and civil complaint alleges that Reyes and Jensen routinely backdated documents to make it appear that the options were "at-the-money" when granted. The complaint also names former CFO Antonio Canova. Reyes and Jensen are being issued a summons to appear in court on August second. The two face up to 20 years in prison, and a fine of $5M plus restitition, according to a statement released by the Attorney General and the SEC.