O engaged in a “very clever and illegal” backdating scheme to defraud shareholders, a prosecutor told a federal jury in the retrial of Gregory Reyes on Monday. Attorney Adam Reeves told a San Francisco federal jury as Reyes, wearing a green sport coat, watched. This was Gregory Reyes’ way to game the system and pad his pocket and the pocket of those inside the company at the expense of those outside the company.” Reyes was the first and highest profile executive convicted of illegal stock option backdating in a government probe into options granting practices at about 170 companies.Reyes is being tried again after a federal appeals court last year threw out his original conviction, citing misconduct by prosecutors. Backdating is a practice of locking in financial gains by retroactively pricing option grants on days when a company’s stock price was low, in effect increasing the value of the options.
Reyes was sentenced to 21 months in prison and fined million after being convicted of securities fraud in 2007.The SEC charged that Brocade did not disclose the hundreds of millions of dollars in compensation expenses to investors and falsified its reported income from 1999 to 2004.The San Jose networking-storage company restated every year of its earnings through 2004 since it went public in 1999.The settlement concludes the SEC’s investigation into Brocade. The SEC said its civil case against Reyes, Jensen and former Brocade chief financial officer Antonio Canova is continuing.Attorneys for Reyes and Canova declined to comment, and Jensen’s attorney did not return calls. Attorney’s Office in San Francisco, declined to comment, as did Conte of the SEC.