What Was That You Said, Greg? It’s Not Illegal if You Don’t Get Caught?

Published on March 29, 2010
by John Paczkowski

and-justice-for-allFormer Brocade Communications Systems (BRCD) CEO Greg Reyes’s luck took a turn for the worse last week when he was once again found guilty of securities fraud.

Though it acquitted him on one count of conspiracy, a federal jury on Friday found Reyes guilty on nine counts of securities fraud and making false statements–the same ones overturned last August because of prosecutorial misconduct.

Reyes, as you may recall, was charged in 2007 with “routinely backdating stock options grants to give employees favorably priced options without recording necessary compensation expenses. From 2000 through 2004, prosecutors alleged, he used the virtually unchecked authority given to him to grant ‘in the money’ options to employees by falsifying in the options documentation the date on which the grants were made and thereby granting the options with below-market strike prices.” In doing so, prosecutors argued, Reyes defrauded Brocade shareholders and violated generally accepted accounting rules.

Interestingly, Reyes’s legal team in the former exec’s most recent trial, opted not to call any witnesses in his defense–evidently an unwise idea give the evidence against him, which included testimony about Reyes’s “It’s not illegal if you don’t get caught” attitude toward options backdating.

Reyes will be sentenced on June 24. His attorneys say they plan to ask the judge for a new trial.

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