Wednesday, August 08, 2007 6:40 AM
Attorney Thomas Gorman, writing at SEC Actions, provided an update on the trial of former Brocade Communications Systems, Inc. CEO Gregory Reyes in his post Stock Option Backdating: A Win For the Government In Reyes Suggests a Narrower Focus in Future Cases:
Today, a jury found former Brocade Communications Systems, Inc. CEO Gregory Reyes guilty on all charges in a case based on backdating stock options. This is the first government enforcement action – civil or criminal – to go to trial. That the government prevailed should not be surprising. The Brocade case is the first options backdating case and was announced with great fanfare by the U.S. Attorney’s Office for the Northern District of California and the Securities and Exchange Commission in a joint press conference. The allegations in the parallel criminal and civil enforcement actions suggested very strong cases. Indeed, the government should be expected to select their best case to begin.
What is perhaps surprising is the drawn out decision by Judge Breyer on the defense Rule 29 motion for acquittal, which was keyed to whether Mr. Reyes understood or knew much about the critical accounting issues involved. Equally surprising is the length of time which the jury took to come to a verdict. While this was clearly a big win for the government, at the same time it should be pause for reflection. Judge Breyer’s long deliberations and those of the jury should at least suggest that prevailing in these cases is not a slam dunk.
Mr. Gorman continued, noting that every company and corporate official involved in the 140 or so investigations the SEC reportedly has underway (as well as those in parallel criminal investigations) must be wondering what this verdict means for them. He finished his post by beginning to answer those questions, which you can read by clicking here: Stock Option Backdating: A Win For the Government In Reyes Suggests a Narrower Focus in Future Cases.
Others in the blawgosphere also offered their thoughts and commentary on the case and its potential ramifications. Here is a sampling to get you started:
Former CEO of Brocade guilty of fraud - The FRAUDfiles Blog
Brocade Ex-CEO Guilty Of Options Fraud | The Register - Information Governance Engagement Area
With Reyes down, is Jobs next? - Ideoblog
The Reyes Conviction: Backdating and the Differing Attitudes Between Delaware and the Federal Government - Securities Law Prof Blog
Jury Convicts Brocade Ex-CEO - Blawgletter
Reyes Convicted on All Counts for Options Backdating - White Collar Crime Prof Blog
Or, as always, feel free to try your own search.