Risk Management

Backdating Bites Another HR Exec

A jury convicts Brocade's Stephanie Jensen on two counts, and she'll likely be headed to prison.
Stephen TaubDecember 6, 2007

A second former executive at Brocade Communications Systems was found guilty in a case involving the backdating of stock-option grants to employees.

Stephanie Jensen, who was the company’s vice president of human resources, was convicted following a two-week jury trial on one count of conspiracy and one count of falsifying books and records.

Jensen, who was described by the Associated Press as wiping away tears when the verdict was read, is scheduled to be sentenced on March 12. She faces up to 20 years in prison and a maximum fine of $5 million.

In early August, a federal jury convicted former Brocade CEO Gregory Reyes on all 10 felony counts related to backdating stock options. He is scheduled to be sentenced on December 19.

According to U.S. Attorney Scott Schools, Jensen schemed to price option grants to Brocade employees by using historical stock performance data to pick low prices while backdating the grant minutes to hide when the options were actually granted. This enabled Brocade to improperly avoid recognizing compensation expenses that would have reduced the company’s reported net income.

“The jury’s verdict re-emphasizes that backdating option grants, when it is done with an intent to deceive, is a crime,” said Schools. “The integrity of our stock markets depends on the accuracy of the books and records of a public company.”

The Justice Department has criminally charged about a dozen executives from different companies for tampering with stock-option awards. Another former top human resources executive, Nancy Tullos, agreed last week to plead guilty in a backdating scheme at Broadcom Corp.