Gregory Reyes, the former chief of Brocade, today was sentenced to 21 months in prison and fined $15m for masterminding a securities scheme using backdated options.
Reyes was the first executive in the US who went to trial over the improper dating of stock-option awards. Altering the date of stock options records so they appear to have been awarded when the price was lower has been a popular — and legal — trick in the tech industry for some years. Unfortunately, so has failing to disclose it with investors and federal regulators. That part...not so legal.
The US government eventually caught wind of the widespread shenanigans in 2006. Since then, 17 executives at eight companies have been charged with illegal backdating offenses.
Reyes originally faced up to 20 years behind bars at his conviction in August for 10 counts altering records and lying over option practices. However, his sentenced was fixed at 21 months, with US District Judge Charles Breyer ruling that Brocade didn't suffer a quantifiable monetary loss as a result of Reyes' scheme.
At the sentencing today, the judge said he also took into account Reyes' contributions to charity. The former CEO will remain free while he appeals his conviction.
Reyes wept as he read a statement that apologized for his actions.
"I'm sorry," Reyes said. "There is much that I regret, and if I could turn back the clock, I would. There were many things I would have done differently."
Stephanie Jensen, a second Brocade executive charged with participating in the company's illegal backdating, was found guilty in December. Her sentence will be delivered on March 12. ®