Former Brocade CEO gets prison, $15M fine for backdating stock options

A former Silicon Valley executive was sentenced in federal court in San Francisco today to a year and nine months in prison and fined $15 million for fraud and false statements in backdating stock options.

Former Brocade Communications Systems Inc. Chief Executive Officer Gregory Reyes, 45, of Saratoga, was the first corporate official in the nation to go to trial in a stock options backdating case.

U.S. District Judge Charles Breyer said the case was “about lying” and “about the failure of the chief executive officer of a publicly traded company to honestly disclose the financial situation of his company.”

Breyer said a prison term was necessary to provide a warning and deterrence to officers of public corporations.

Defense attorneys had asked for a sentence of one year and one month to be served in a halfway house or home detention. Prosecutors had asked for at least twoand one-half years in prison, a $41 million fine and $90 million in restitution.

Breyer allowed Reyes to remain free while he appeals his conviction and sentence.

Reyes headed San Jose-based Brocade from 1998 to 2005. He was convicted in Breyer's court in August of 10 counts of securities fraud, conspiracy to commit fraud and making false statements in company records and to accountants.

Bay City News

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