Brocade communications options backdating keystrokedating com
In a showdown next week in a federal appeals court in San Francisco, former Brocade Communications CEO Gregory Reyes will present arguments that his 2007 convictions and 21-month prison sentence should be set aside, in large part because of what his high-powered legal team maintains was a government prosecution marked by “foul blows” and misconduct.
“It could send a message,” said Peter Henning, a Wayne State University law professor and expert on white collar crime.
To avoid having to pay higher taxes, many companies adopted a policy of issuing “at the money” stock options in lieu of additional income, with the idea that the executive or employee would benefit through the option by working to increase the value of the company without exceeding the one million dollar deductibility cap for executive income.
When company executives discovered that they had the ability to backdate stock option grants, thus making them both tax deductible and “in the money” on the date of actual issuance, the common practice of stock option backdating for financial gain began on a widespread level.
“Are they going to uphold a conviction that was a pretty aggressive use of securities laws? Attorney Amber Rosen, who is defending the convictions on appeal, also declined to comment.
Any violation of securities laws can be prosecuted, but not every one is. ” Reyes is backed in the case by two national organizations — a coalition of former U. attorneys and Justice Department officials who argue that the government was overzealous in its pursuit of the backdating prosecution; and the National Association of Criminal Defense Lawyers, which warned the 9th Circuit that “this case represents an unwarranted expansion of criminal securities fraud liability.” Waxman declined to comment. But in court papers, the government called Reyes’ legal arguments “without merit,” describing him as an executive who “defrauded shareholders by routinely granting his employees backdated stock options, falsifying corporate records to conceal the backdating” to overstate the company’s profits.