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Another appeal may be in the works after the latest guilty finding by a jury.
Gregory Reyes, ex-CEO of Brocade Communications and former owner of the San Jose Sharks, was found guilty by a federal jury on March 26 of intentionally backdating stock options for the benefit of employees and himself, according to the .
Brocade's indicted ex-CEO Greg Reyes filed a nervy motion in federal court Monday whose fate could have an enormous impact on the 200 or so other public companies now under scrutiny for options backdating.
In it, Reyes asks that the fraud charges against him be dropped on the grounds that the backdating of which he stands accused had such a trivial impact on Brocade's financial statements that no reasonable investor would have paid it any mind when deciding whether to buy or sell a share of Brocade (BRCD) stock.
Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.
The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.
the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.
“Probably,” because we don’t know what’s been uncovered in the other investigations - but from the looks of the SEC’s complaint, this one has all the ingredients of a good hand for the prosecution.
CEO Reyes acted as a one-man compensation committee; he enlisted Jensen’s help in backdating option documents (and she understood the implications); Reyes benefitted personally from the options backdating scheme.