Feeds

SEC hits former Brocade CEO first in operation 'Options Fiasco'

The new Martha Stewart

Top 5 reasons to deploy VMware with Tegile

You can slap an apron on Greg Reyes and hand him a rolling pin. The US Securities and Exchange Commission (SEC) has just turned the former Brocade CEO into the Martha Stewart of the options expensing scandal.

The SEC today hit Reyes with criminal and civil charges, alleging that the CEO backdated stock options to make compensation packages more lucrative for new workers. According to the SEC, Reyes then failed to expense the option awards properly. Reyes has become the first major executive to be charged by the SEC as part of a far-reaching probe into how companies handled stock option expenses.

The SEC has also accused Brocade's former CFO Antonio Canova and human resources VP Stephanie Jensen of helping Reyes conduct the options operation.

Richard Marmaro, a lawyer for Reyes, hit back against the SEC, saying his client "is innocent" and willing to "prove his innocence in a court of law."

"It is surprising that in an area where the government is investigating at least 60 companies on allegations of stock options accounting irregularities, the government would choose to charge Mr. Reyes. Mr. Reyes is not even alleged to have granted himself any of the options at issue in the case, nor is there even an allegation that he made any money through the alleged option irregularities," Marmaro said. "All he did was what his Board authorized him to do. During a time where competition was extremely high in Silicon Valley for employees, he awarded options to new and current employees of the company - from the receptionist to engineers - to attract and retain talent."

The options question is part of the dot-com hangover still haunting Silicon Valley. Technology companies reworked the dates of options grants in the hopes of creating more competitive pay packages during a fierce hiring boom here.

Storage switch maker Brocade hired a new CEO in January of 2005 after an internal audit turned up accounting irregularities around the way options were handled. The company maintained an amicable relationship with Reyes at first, handing him a lucrative consultancy package. Later, however, Brocade moved to sever ties with Reyes and argued that he had not been performing the consultant duties as expected.

Later in 2005, the SEC announced a formal probe into Brocade's bookkeeping.

Brocade has been forced to restate past financial results on numerous occasions. ®

Beginner's guide to SSL certificates

More from The Register

next story
729 teraflops, 71,000-core Super cost just US$5,500 to build
Cloud doubters, this isn't going to be your best day
Azure TITSUP caused by INFINITE LOOP
Fat fingered geo-block kept Aussies in the dark
Want to STUFF Facebook with blatant ADVERTISING? Fine! But you must PAY
Pony up or push off, Zuck tells social marketeers
Oi, Europe! Tell US feds to GTFO of our servers, say Microsoft and pals
By writing a really angry letter about how it's harming our cloud business, ta
You think the CLOUD's insecure? It's BETTER than UK.GOV's DATA CENTRES
We don't even know where some of them ARE – Maude
SAVE ME, NASA system builder, from my DEAD WORKSTATION
Anal-retentive hardware nerd in paws-on workstation crisis
Astro-boffins start opening universe simulation data
Got a supercomputer? Want to simulate a universe? Here you go
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.