Brocade CEO Guilty of Fraud in Backdated Options

First conviction in backdating crackdown
By Jonas Oransky,  Newser Staff
Posted Aug 7, 2007 8:26 PM CDT
Former Brocade Communications Systems Inc. Chief Executive Gregory Reyes leaves the federal building in San Francisco, in this July 26, 2007 file photo. Reyes was convicted Tuesday, Aug. 7, 2007, of defrauding...   (Associated Press)
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(Newser) – The former head of a data-storage company today became the first chief executive convicted in the crackdown on backdated executive stock options. Gregory Reyes, CEO of Brocade communications, was found guilty in federal court in San Francisco of 10 counts of conspiracy and fraud.

Brocade ousted Reyes after the company had to restate earnings because of the hidden cost of altered stock options, which he had signed off on. The case hinged partly on Reyes’ knowledge of accounting rules; a pivotal moment came when a witness testified that the CEO had once said, “It’s not illegal if you don’t get caught.”