General Crime

* Gregory Reyes Sentenced to Jail for Stock Options Fraud

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A former Silicon Valley chief executive was sentenced in federal court in San Francisco today to one year and six months in prison for his role in a stock options backdating case. Gregory Reyes, 47, of Saratoga, a former chief executive officer of Brocade Communications Inc. of San Jose, was also ordered by U.S. District Judge Charles Breyer to pay a $15 million fine. Reyes was convicted by a jury in Breyer’s court in March of nine counts of securities fraud, falsifying company records and making false statements in connection with stock purchase options granted to employees and to himself between 2001 and 2004. The trial was his second on the charges. He was convicted of similar charges in his first trial in 2007, but that conviction was overturned by a federal appeals court on the ground that a prosecutor misled jurors during closing arguments. Reyes’ earlier trial was the first in the nation to be held in connection with a probe of stock options backdating by the U.S. Justice Department and Securities and Exchange Commission. Breyer ordered Reyes to surrender to authorities to begin serving his prison term on Sept. 10. He turned down Reyes’ request to be allowed to remain free while he appeals the conviction. Breyer said he believes there are no substantial issues in the appeal. Shortly before the sentencing, Breyer issued a written ruling rejecting Reyes’ request for a judgment of acquittal or a new trial. The judge said that even though others in Brocade’s finance department allegedly knew about the backdating, Reyes himself signed the fraudulent grant dates. Breyer wrote, “Whether or not others in Brocade knew of this scheme and participated in it, this does not undermine Reyes’ essential role.”  Reyes, a former part-owner of the San Jose Sharks hockey team, was chief executive officer of Brocade, a data storage networking company, from 1998 to 2005. Defense attorneys had asked for a sentence of probation with no prison time, while prosecutors sought a sentence of three years and one month.

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