US Federal authorities have filed criminal and civil charges against Greg Reyes, Brocade Communications' ex-CEO, Stephanie Jensen, the company's former VP of human resources, and former CFO Tony Canova.
The charges say that after Brocade shares rose in price the pair backdated stock options to a time when the shares were cheaper. Reyes and others could then buy the shares at the cheap price and sell them at the new higher pricing making a terrific profit. Canova has civil charges filed against him that accuse him of being complicit in the affair.
Reyes denies the charges. His lawyer says he never personally benefited and only did what the board authorised him to do.
A Brocade company statement says it's offered a preliminary agreed amount to the SEC as a fine/compensation. Reyes, Jensen and Canova are no longer with Brocade. It's tightened its procedures. Time to move on. Well, yes; that about sums it up.
Reyes and Jensen faces 5-20 years in jail plus a fine of up to $5 million. Brocade must be wishing that the affair will just go away. It looks as if Reyes will mount a robust defence as there is no love lost between him and the current Brocade board and CxO staff. After awarding him a consultancy contract once he resigned Brocade then tried to cancel it because Reyes hadn't done what they thought he should have done.
Reyes will probably try to pass the buck to the Brocade board. It's going to get messy and it is a shame. Reyes founded a terrific company and it's regrettable that his legacy and Brocade's reputation should be tarnished with this little saga of greed and venality.