Brocade, Ex-CEO Reyes May Settle Enrichment Claims, Lawyers Say - 2 Feb 2009

Brocade, Ex-CEO Reyes May Settle Enrichment Claims, Lawyers Say

By Karen Gullo

Feb. 3 (Bloomberg) -- Greg Reyes, the former Brocade
Communications Systems Inc. chief executive officer convicted of
stock-options manipulation in 2007, may settle company claims he
breached his fiduciary duties and unjustly enriched himself.

Attorneys for Reyes and Brocade, in a filing yesterday in
federal court in San Francisco, said the two sides have been
“working towards an agreement to resolve through binding
arbitration” a company lawsuit against Reyes and other Brocade
executives.

The parties “require additional time to finalize the terms
of such an agreement,” according to the document. Reyes has
until Feb. 16 to file his own lawsuit against an unnamed “non-
party,” according to the filing.

Richard Marmaro, Reyes’s attorney, confirmed in a phone
interview that the two sides were discussing a settlement and
declined further comment. John Noh, a Brocade spokesman, didn’t
immediately return a voice-mail message left after business
hours yesterday. San Jose, California-based Brocade, the biggest
maker of switches for data-storage networks, agreed in June to
pay $160 million to resolve shareholders’ securities-fraud
claims over stock-options backdating.

The backdating led to the ouster of Reyes and a $7 million
fine against the company to end a Securities and Exchange
Commission lawsuit.

Reyes was convicted of conspiracy and fraud for backdating
hundreds of employee option grants in 2001 and 2002. Prosecutors
said he hid the practice from auditors and investors and
inflated the company’s reported revenue. The company restated
its results twice in 2005.

Reyes’s Claims

Reyes has denied wrongdoing and said at his trial and in
court filings that he...

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