Greg Reyes sentenced

by Robin Harris on Saturday, 26 June, 2010

Greg Reyes, former CEO of Brocade, received a sentence of 18 months and a $15 million dollar fine for his conviction on 10 felony counts related to options backdating. Prosecutors had asked for 37 months and a $137 million dollar fine. Mr. Reyes was emotional at his sentencing:

When Reyes got his opportunity to address Breyer, he stood at the lectern silently for a few seconds, and then broke down sobbing. [His attorney] read his statement for him.

“I am a shell of the man I once was,” he read.

Breyer said he was quite moved by the 400 letters sent in on Reyes’ behalf, as well as the financial and emotional support he extends toward others. Yet a message must be sent to executives that deceiving the public markets is a serious crime, Breyer said.

The judge cited one more reason for a prison term.

“White-collar defendants, unlike most defendants I see in court every day, have choices,” Breyer said, adding that he had just sentenced a man to more time than Reyes because he illegally re-entered the United States to see his 5-year-old son.

In two weeks, Breyer will sentence another man whose drug addiction began when his father shot him up with heroin when he was 11.

“What choices did that young boy have?” Breyer said.


The best CEO of any high tech company?
I met Mr. Reyes a couple of times when both of us wanted Sun to buy FC switches to make Sun’s early FC array more maintainable. I was at Sun at the time. He was an excellent salesman, but some idiot had decreed no FC switches for the storage group.

Storage Newsletter had an odd bit of history as well:

In 2002, we asked Steve Duplessie, well known consultant, to told [sic] us who was the best CEO in the storage industry. His answer: “[The best CEO] would be Greg Reyes of Brocade.””

The 2 critical success factors for salesman are: a capacity for self-delusion – so you can sincerely and honestly tell your prospects how good it is; and a resolutely short term focus, because making this quarter’s numbers is what counts. Don’t hire a salesman to design your products or your strategy.

The StorageMojo take
Given Brocade’s current problem – they’ve been for sale for over 9 months and there are no takers – and his own, Mr. Reyes was no strategist. But Brocade’s IPO timing made fortunes for Mr. Reyes and co-founders Paul Bonderson and Kumar Malavalli. Isn’t that what really counts?

But Mr. Reyes can be forgiven if he feels unfairly singled out. Here we are 2 years after after the big Wall Street meltdown, where the big ibanks were packaging and selling crap and calling it gold, when mortgage companies and rating agencies had gone wild, and who’s gone to jail for that?

At the same time, Maher Arar, a Canadian who was arrested in 2002 by U.S. officials while changing planes in New York on a trip to Montreal and then rendered by US officials to a Syrian jail was denied a hearing by the US Supreme Umpires. According to the findings of fact, Mr. Arar

. . . was in Syria for a year, the first ten months in an underground cell six feet by three, and seven feet high. He was interrogated for twelve days on his arrival in Syria, and in that period was beaten on his palms, hips, and lower back with a two-inch-thick electric cable and with bare hands.

So buck up, Mr. Reyes, things could be worse. In 18 months you will have paid your debt to stockholders and you will still be among the richest 30,000 or so people in the world.

Courteous comments welcome, of course. America is a nation of laws, not of men, unless the men are fighting terrorism.

{ 9 comments… read them below or add one }

Thomas Jefferson June 27, 2010 at 6:44 am

… and yet, these are the people you so desperately desire to give totalitarian control over our health care. I never understand why bureaucrat-worshiping statists complain when the behemoth they created spins out of control.

Robin Harris June 27, 2010 at 3:06 pm


Try breathing into a paper bag for a few minutes. Then review the dictionary definition of “totalitarian” and the act passed by Congress. You might try turning off Fox News and Sarah Palin’s twitter feed while you’re at it.


james dean June 28, 2010 at 1:35 pm

I am sorry to see you decided to use this professional blog into a political vehicle for bashing both the us gov and supreme court (not ‘umpires’); for the record, I think that the US was within its rights to deport mr. Arar to his country of citizenship, but that’s immaterial – I did not subscribe to this blog to read your views on politics, but rather for your knowledgeable take on the storage space. Unfortunately, you insist on mixing those, so regretfully my RSS reader will be one subscription short.

Robin Harris June 28, 2010 at 2:18 pm

James – For the record “umpire” was a term introduced by the Chief Justice, not me. It is specious metaphor, of course, which is why I used it ironically.


Jacob Marley June 28, 2010 at 8:12 pm

@james dean:

While Mr Arar has dual citizenship of Syria and Canada, he was deported by US authorities @JFK while traveling on a Canadian passport from Tunis back to Canada.

The issue that remains is, while Canada and Syria have both acknowledged Mr Arar has no links to terrorist, the US has not removed Mr Arar and his family from it’s no fly lists, forget actually admitting a mistake may have been made.

All for the umpire indeed.

Back to the topic at hand, the few people that I know that have worked for Greg held him in high regard. Remains to be seen if Brocade will succeed in it’s transformation with Foundry without Greg.

Billy June 30, 2010 at 8:49 am

Robin – Excellent summary and another reason why yours is the first blog I check out every morning. Brocade was a product of Wall Street pure and simple – a one-trick pony that touched the $100 billion market cap point for a few seconds while Greg and company sold millions of shares all the way down. Some one should write a book about the whole sorry episode, but as you said, the more recent housing/mortgage scam bubble makes it look like small beer (not to mention the shame we all bear for allowing the Maher Arar affair to be swept under the carpet).

Blissex July 3, 2010 at 2:47 pm

I always wonder whether option backdaters like Reyes will get many years (probably dozens) of jail for massive tax evasion, as backdating options fraudulently turns current income into fictitious capital gains. In some option backdating cases there are dozens of millions of tax fraud.

As the judge says, the law can be harsh with people facing little or cruel choices — tax fraud like in options backdating is always a conscious, clever attempt to swindle by the very rich. let’s see if the IRS and prosecutors think that paying tax is a duty only for the little people.

Joe Kraska July 4, 2010 at 8:58 am

I would be one with the other reader who would say–leave the storage blog to storage, even if the political subject is one with which I might agree. Don’t want it here. As a storage industry expert, you’re a little like a teacher, and a teacher who uses his privileged role also as a soapbox for his political beliefs to espouse said beliefs to his captive student audience. That always has been pretty weak.

Joe Kraska
San Diego CA

Blissex July 11, 2010 at 8:04 am

«soapbox for his political beliefs»

Which political beliefs? StorageMojo has only commented on criminal law being enforced mildly or severely, reporting the words of a judge.

Since when being happy that the law is being enforced against fraudsters is a “political belief”?

“America is a nation of laws, not of men” is the basis of the USA constitution, not a partisan political position — those who believe otherwise don’t belong in the USA.

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