Ex-Brocade CEO Gets Fine, Jail Term

January 16, 2008 (PLANSPONSOR.com) - The former chief executive of Brocade Communications Systems was slapped with a $15 million fine and a 21-month jail term for offenses relating to stock options backdating.

U.S. District Judge Charles Breyer of the U.S. District Court for the Northern District of California imposed the sentence Wednesday on Gregory Reyes – one of two defendants convicted of options-related offenses, the Wall Street Journal reported.

Reyes was the first executive to be convicted of backdating charges at trial in August 2007, when a jury found him guilty of 10 counts, including fraud, falsified accounting, conspiracy, and filing false financial statements (See Former Brocade CEO Gets 10 Guilty Verdicts for Backdating Charges ). Last month, Stephanie Jensen, Brocade’s former head of human resources, was convicted of conspiracy and falsifying corporate records in connection with the backdating (See Options Charges Claim Second Brocade Defendant ).

Prosecutors asked for a fine for Reyes exceeding $41 million, in addition to $89 million in restitution to the company, but Breyer said he found that request excessive. He added that he was hesitant to award restitution since the company will likely sue its ex-CEO.

According to the Journal, 17 executives at eight companies have been charged with criminal offenses related to backdating. Eight have pled guilty, and one fled to Namibia and is fighting extradition to the U.S.

The San Jose-based Brocade is a data-storage networking firm.