Feds Hit Former Brocade Execs With New Charges

The Department of Justice has filed new securities-related fraud charges against former
Brocade officials already
under indictment for violating securities laws.

The new indictment against former Brocade CEO Gregory Reyes, and Stephanie
Jensen, the former vice president of human resources, includes four counts
of making false statements to accountants, three counts of making false SEC
filings, two counts of mail fraud, as well as conspiracy and other charges.

The indictment describes how Brocade officials allegedly backdated
employment offer letters and personnel records in order to make the
back-dated stock options jibe with when the employees were supposed to have
been hired.

The DoJ claims that executives at the computer gear maker perpetrated this
fraud in order to attract qualified personnel with stock option grants that
had lower valuations and could thus be exercised at higher profit.

The charges were filed by Kevin Ryan, U.S. Attorney for the Northern
District of California.

Richard Marmaro, the lead attorney for Reyes, said in response to the
charges that the Feds have failed to uncover a single document incriminating
his client.

“We have reviewed more than 400,000 pages of material that Brocade supplied
to the government, and not a single document suggests fraud,” he said in a
statement.


He added that documents do show that Brocade’s option-grant paperwork was
fraught with inadvertent errors made by employees in the company’s HR and
finance departments.

Reyes and Jensen face 20 years in prison and $5 million in fines for granting backdated stock options
to employees between 2000 and 2004.

Former Brocade CFO Antonio Canova was also charged with knowing of the
alleged fraud when he joined the company, and with failing to inform
auditors.

News Around the Web