While backdating is not itself illegal, companies must account for those options as a noncash expense against reported earnings.During the trial that began last month, federal prosecutors Adam Reeves and David Anderson spent three weeks presenting evidence and testimony to bolster their charges that Reyes knowingly signed false documents and conspired to disguise the history of some of the company’s stock-option grants.In his arguments to the jury, defense attorney Neal acknowledged that backdating occurred and that Brocade’s accounting was flawed.

Brocade has since revised its earnings statements for the period.
Reyes is widely credited with building Brocade into a major supplier of data storage networking equipment.
Citing evidence that Brocade board members and financial officers were also aware of the backdating, or even took part in it, Neal argued that Reyes relied on the finance officials to ensure that Brocade was complying with complex and confusing accounting rules.
During the three-week trial, prosecution witnesses testified that Brocade reported annual profits in 20 when the company’s backdating expenses should have led the company to report a net loss of more than $175 million in each year.
But many in Silicon Valley wondered why he was singled out for what appeared to be a common practice in the early part of last decade, when Silicon Valley was experiencing tremendous growth and successful tech companies competed to attract talented employees by handing out stock options that made many people rich.
Authorities said Reyes and others profited from receiving backdated options, which allowed them to buy Brocade stock at lower prices than outside investors paid.
At the height of the Internet bubble 10 years ago, Forbes estimated his wealth at
Authorities said Reyes and others profited from receiving backdated options, which allowed them to buy Brocade stock at lower prices than outside investors paid.At the height of the Internet bubble 10 years ago, Forbes estimated his wealth at $1 billion, although it is believed to be less today. Charges and verdicts Here is a breakdown of the charges and verdicts in the case against Gregory Reyes: Not guilty on one count of conspiracy to commit securities fraud. Guilty on three counts of filing false documents with the SEC. Guilty on four counts of making false statements to Brocade”s accountant. reyes timeline January 2005 Gregory Reyes steps down as chairman and CEO of Brocade Communications 20, 2006Reyes charged with criminal and civil securities fraud. 7, 2007Reyes found guilty in the nation”s first criminal trial related to stock-option backdating. 18, 2009Appellate court overturns Reyes” conviction. INITIAL_PROPS_HEADER = {"data":,"id":"wsj/header","context":{"article Id":"SB120050817585095031","author":"Justin Scheck and Steve Stecklow","breakpoint":"lg","corp Hat":[,],"customer Nav":{"user":null,"ads":,"urls":{"login Url":"https://com/login?target=https://com/articles/SB120050817585095031","logout Url":"https://com/logout? The move could unleash a host of other actions against senior executives at top US network and IT suppliers.
||Authorities said Reyes and others profited from receiving backdated options, which allowed them to buy Brocade stock at lower prices than outside investors paid.
At the height of the Internet bubble 10 years ago, Forbes estimated his wealth at $1 billion, although it is believed to be less today. Charges and verdicts Here is a breakdown of the charges and verdicts in the case against Gregory Reyes: Not guilty on one count of conspiracy to commit securities fraud. Guilty on three counts of filing false documents with the SEC. Guilty on four counts of making false statements to Brocade”s accountant.
reyes timeline January 2005 Gregory Reyes steps down as chairman and CEO of Brocade Communications 20, 2006Reyes charged with criminal and civil securities fraud. 7, 2007Reyes found guilty in the nation”s first criminal trial related to stock-option backdating. 18, 2009Appellate court overturns Reyes” conviction.
INITIAL_PROPS_HEADER = {"data":,"id":"wsj/header","context":{"article Id":"SB120050817585095031","author":"Justin Scheck and Steve Stecklow","breakpoint":"lg","corp Hat":[,],"customer Nav":{"user":null,"ads":,"urls":{"login Url":"https://com/login?
target=https://com/articles/SB120050817585095031","logout Url":"https://com/logout?
The move could unleash a host of other actions against senior executives at top US network and IT suppliers.
||Authorities said Reyes and others profited from receiving backdated options, which allowed them to buy Brocade stock at lower prices than outside investors paid.
At the height of the Internet bubble 10 years ago, Forbes estimated his wealth at $1 billion, although it is believed to be less today. Charges and verdicts Here is a breakdown of the charges and verdicts in the case against Gregory Reyes: Not guilty on one count of conspiracy to commit securities fraud. Guilty on three counts of filing false documents with the SEC. Guilty on four counts of making false statements to Brocade”s accountant.
reyes timeline January 2005 Gregory Reyes steps down as chairman and CEO of Brocade Communications 20, 2006Reyes charged with criminal and civil securities fraud. 7, 2007Reyes found guilty in the nation”s first criminal trial related to stock-option backdating. 18, 2009Appellate court overturns Reyes” conviction.
INITIAL_PROPS_HEADER = {"data":,"id":"wsj/header","context":{"article Id":"SB120050817585095031","author":"Justin Scheck and Steve Stecklow","breakpoint":"lg","corp Hat":[,],"customer Nav":{"user":null,"ads":,"urls":{"login Url":"https://com/login?
billion, although it is believed to be less today. Charges and verdicts Here is a breakdown of the charges and verdicts in the case against Gregory Reyes: Not guilty on one count of conspiracy to commit securities fraud. Guilty on three counts of filing false documents with the SEC. Guilty on four counts of making false statements to Brocade”s accountant.reyes timeline January 2005 Gregory Reyes steps down as chairman and CEO of Brocade Communications 20, 2006Reyes charged with criminal and civil securities fraud. 7, 2007Reyes found guilty in the nation”s first criminal trial related to stock-option backdating. 18, 2009Appellate court overturns Reyes” conviction.
INITIAL_PROPS_HEADER = {"data":,"id":"wsj/header","context":{"article Id":"SB120050817585095031","author":"Justin Scheck and Steve Stecklow","breakpoint":"lg","corp Hat":[,],"customer Nav":{"user":null,"ads":,"urls":{"login Url":"https://com/login?
target=https://com/articles/SB120050817585095031","logout Url":"https://com/logout?
The move could unleash a host of other actions against senior executives at top US network and IT suppliers.