Risk Management

First Convicted Backdater Sentenced to Prison

Fresh out of delay tactics, Brocade's former CEO Greg Reyes is headed to prison.
Stephen TaubJanuary 16, 2008

The former chief executive officer of Brocade Communications Systems was sentenced to 21 months and prison and ordered to pay a $15 million fine. He is the first executive to go to trial and be convicted for orchestrating a scheme to illegally backdate stock options.

According to The Wall Street Journal, Reyes broke down crying while speaking to the judge before his sentence was handed down. The sentence no doubt will send shock waves throughout Corporate America. Indeed, at least one dozen other executives have been criminally charged in options cases, according to the Associated Press.

In August, a federal jury convicted Reyes on all 10 felony counts. Reyes was charged in July 2006 on 12 felony counts of securities fraud and other offenses, although the two mail-fraud charges were subsequently dropped.

The trial went through a roller coaster of apparent strategy shifts. At first, Brocade’s former Michael J. Byrd 9356760 was listed as a potential government witness, and it was suggested that he might become the trial’s star witness. But Byrd was never called by prosecutors.

Near the end of the trial, District Judge Charles Breyer, brother of U.S. Supreme Court Justice Stephen Breyer, shocked some observers by considering a defense motion to end the trial without sending it to the jury. In all, Reyes sentencing had been delayed several times until Wednesday’s announcement was made official.

Brocade is the world’s largest maker of switches for data-storage networks.