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» VIEW ALL POSTS Aug 19 2009   1:17PM GMT

Ex-Brocade CEO Reyes gets a new trial



Posted by: Dave Raffo
Tags:
storage vendors; Fibre Channel switches

Remember the 2007 stock option backdating trial that ended in the conviction of former Brocade CEO Greg Reyes and cost Brocade hundreds of millions of dollars in legal fees? Well, get ready for the rematch.

The 9th U.S. Circuit Court of Appeals Tuesday ordered a new trial for Reyes, claiming prosecutorial misconduct. Reyes was convicted of fraud and other counts, and sentenced to 21 months in prison and fined $15 million in January 2008. The appeals court ruling said a prosecutor falsely claimed the Brocade finance department was unaware that Reyes was granting backdated stock options to lure employees to the company.

“We reverse Reyes’ conviction because of prosecutorial misconduct in making a false assertion of material fact to the jury in closing argument,” the three-judge panel said in its decision.

The appeals court claimed prosecutor Timothy Crudo knew employees of Brocade’s finance department told the FBI they were aware of the backdating scheme, yet he told the jury the finance department did not know about it.

“We do not conclude the prosecutor’s conduct was so egregious as to require dismissal of the prosecution,” the appeals court wrote. “Reyes’ case must be remanded for a new trial.”

There is no word yet on when a new trial will take place.

The appeals court upheld the conviction of former Brocade VP of human resources Stephanie Jensen but ordered that she be given a new sentence for falsifying corporate records. Jensen was sentenced to four months in prison and a $1.25 million fine. That sentence included an obstruction of justice charge, but the appeals court ruled that was her counsel’s fault and she should not be penalized for obstruction.

Reyes and Jensen have been free pending their appeals.

Reyes left Brocade in 2005 after the first hint of the backdating charges was made public. Brocade paid $160 million to settle shareholder lawsuits and $7 million to settle an SEC suit.

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