It seems as though there’s no end in sight for the Brocade saga. As noted in the September issue of Corporate Secretary magazine, former Brocade CEO Greg Reyes was found guilty of backdating and defrauding shareholders.
The first of the options backdating cases to go to trial, the Brocade verdict could influence the trial outcomes of other companies. For now, however, Brocade continues to be in the hotseat. Last week the SEC turned its gaze to Brocade’s ex-CFO Michael Byrd who will now face similar charges. The SEC says Byrd, who hasn’t been with the company since 2003 when he retired, ignored that backdating was occurring from 2000 through 2003.
His prosecutor, John Potter, isn’t backing down, and says that Reyes’ conviction serves to exculpate his client.
According to a document sent to CFO.com, Potter argues that Reyes ‘pinned his defense on the claim that his stock option backdating practices were known to Mr. Byrd and other members of Brocade's finance department, who failed to expense the options.’ And since federal courts did not accept said defense, they effectively cleared Byrd.
Byrd also benefited from backdated options in 2001, to the tune of $16 million. And the SEC is also seeking disgorgement of any improper profits he received. So no matter what happens, it looks like Byrd is going to be another Brocade exec to get hit hard.
By Janine Armin
Corporate Secretary magazine