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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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From: CalculatedRisk7/21/2006 10:24:13 AM
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U.S. Charges 2 in Stock Option Case
The ex-CEO of tech firm Brocade and a colleague are criminally accused of backdating grants to make them worth more. Other cases may follow
latimes.com

The U.S. attorney in San Francisco accused two former Brocade Communications Systems Inc. executives of routinely giving options to employees from 2000 to 2004 at terms that guaranteed an immediate paper gain for the recipients.
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The alleged backdating at San Jose-based Brocade was fraudulent, authorities said, because it was concealed from shareholders and because it involved falsifying documents and inflating Brocade's earnings.
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In the criminal case against Reyes and Jensen, the government alleges that the executives backdated meeting minutes of a committee of Brocade's directors "so that it appeared that the committee met and stock options were granted and priced at the market value of Brocade's stock on dates when the value of the stock was relatively low, when in fact no such meetings occurred and the options were not granted on those dates."

The executives also backdated employment-offer letters and other personnel records for some new employees so that those employees could get stock option grants at attractive prices that predated their actual employment at Brocade, prosecutors alleged.

In the process of backdating options, Reyes and Jensen misrepresented Brocade's financial data and made false filings with the SEC, the government said.
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