Brocade’s ex-CEO convicted on 9 felony charges

by Robin Harris on Monday, 29 March, 2010

In a 2nd trial, Brocade’s former CEO Gregory Reyes was convicted of 9 felony charges of fraud and making false statements. The jury deliberated for 4 days.

The jury acquitted him of a conspiracy charge. Sentencing is set for June 24. His lawyer will appeal for a new trial.

Mr. Reyes made some $380 million dollars off Brocade during the dot com boom. What investors didn’t know is that if he had followed the proper accounting rules Brocade’s $67 million FY2000 profit would have been a $950 million loss, at least on paper. Options are a non-cash expense, but so are a lot of other things on income statements.

Mr. Reyes was sentenced to 21 months in prison and a $15 million fine after the first trial, but that was thrown out on appeal and a re-trial ordered. However, that sentence was based on a calculation of “zero-loss” and now prosecutors say they can reasonably calculate loss.

Brocade paid $160 million to settle a class-action suit after Mr. Reyes first trial, a number likely to figure in the prosecutor’s calculations.

The StorageMojo take
Mr. Reyes can take solace in the fact that in America it is the size of your bank account, not the length of your rap sheet, that determines the esteem of your fellow citizens. On that measure Mr. Reyes will do very well, with even a fine of $100 million leaving him a very wealthy man.

There will be an all-expenses-paid stay at a Club Fed, but in 5 years that will be a fading memory. And he’ll tap a rich vein of Valley “there but for the grace of God go I” sympathy once he is out.

If he chooses to follow the well-worn path of public contrition – which he hasn’t yet – followed by good works all will be forgiven in a few years. It could be worse.

Courteous comments welcome, of course.

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