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Brocade ex-CEO convicted in first stock options backdating trial

[JURIST] A federal jury in California convicted [USAO press release] former Brocade Communications Systems [corporate website] CEO Gregory Reyes Tuesday in the first stock options backdating case to go to trial. The jury found Reyes guilty of conspiracy, securities fraud, lying to accountants, and false books for backdating stock options for employees to days when the stock was low in order to increase employee profits on trades. Reyes' attorney, who plans to file an appeal, said after the case that Reyes "acted in the best interests of the employees and shareholders of Brocade." Reyes is scheduled to be sentenced in November.

The practice of backdating includes setting an option-holder's stock price at a day when stock prices were low instead of the price on the day the option was granted. Although the practice itself is not illegal, it can become so if proper records are not kept to account for it. In January, the US Attorney's office in San Francisco opened a separate criminal probe [JURIST report] into the option backdating practices of Apple, Inc. [corporate website]. Although charges against CEO Steve Jobs are unlikely, the Securities and Exchange Commission [official website] said in April that they are considering charges [JURIST report] against former General Counsel Nancy Heinin on allegations of backdating two 2001 stock option grants. Reuters has more.

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