Former Brocade executive convicted in stock options backdating case

A former Silicon Valley executive was convicted of two charges in federal court in San Francisco today in the second stock options backdating-related case in the nation to go to trial.

A jury in the court of U.S. District Judge Charles Breyer convicted former Brocade Communications Systems Inc. vice president Stephanie Jensen of one count of conspiracy to falsify company books and records and one count of falsifying books.

Jensen, 49, of Los Altos, was vice president for human resources of the San Jose-based computer networking company from 1999 to 2004.

Breyer scheduled her sentencing for March 12, 2008. The verdict came on the jury's second day of deliberations following a six-day trial.

Jensen's defense attorney, Jan Little, indicated in court that she plans to file a motion seeking a new trial.

Three months ago, Jensen's onetime boss, former Brocade Chief Executive Officer Gregory Reyes, was convicted in Breyer's court of 10 counts related to stock options backdating.

Reyes, 44, of Saratoga, is awaiting sentencing.

The two executives were indicted in the course of a nationwide government probe of the practice of backdating stock options, which enables employees to buy company stock at a lower price and thus higher profit.

The U.S. Justice Department and Securities and Exchange Commission have investigated several dozen corporations. Federal criminal charges have been filed against at least 10 executives and Reyes's and Jensen's cases have been the first two to go to trial.

Backdating is not illegal in itself, but it is illegal to fail to record the practice as a compensation expense in company books.

Little argued during the trial that Jensen, who had no financial or accounting background, was merely following instructions from Reyes when she prepared options with earlier dates, didn't believe she was doing

anything wrong and wasn't aware of the effect of her actions on the company's financial statements.

But prosecutors contended that Jensen knew the backdating was wrong and tried to hide it.

Assistant U.S. Attorney Adam Reeve told the jury at the start of the trial that the alleged scheme by Reyes and Jensen was “simple, ingenious and a total fraud.”

— Bay City News

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