Brocade's Reyes gets 21 months in backdating case

Former Brocade Communications Systems CEO Gregory Reyes has been sentenced to 21 months in prison and a US$15 million fine for fraud related to backdating of the storage networking company's stock options.

Reyes was convicted last August in the most prominent of many criminal and civil cases in the past two years related to backdating by high-tech companies. Apple, McAfee, Rambus and scores of other vendors have faced either internal or external probes. Reyes' conviction was the first by the U.S. Department of Justice in a backdating case. Reyes was found guilty on 10 charges including securities fraud, conspiracy and falsifying financial records. He could have faced as much as 20 years in prison.

The sentencing order on Wednesday from Judge Charles Breyer of the U.S. District Court for the Northern District of California has been stayed pending an expected appeal, which has not yet been filed, according to the court.

Backdating, which involves changing the date that stock options grants were made to certain employees so they can later get a bigger profit, is not illegal but has to be accounted for properly. Many high-tech companies used the practice during the Internet boom early in this decade to attract prized employees.

In the wake of Brocade's backdating problems, the company restated its results from 1999 to 2004. The scandal also led to charges against Stephanie Jensen, former vice president of human resources, and Michael Byrd, the company's former chief financial officer and chief operating officer.

The IDG News Service is a Network World affiliate.