Discussion about "Ex-Brocade Chief to Pay $12.5 Million to Settle Backdating Case - Bloomberg" - 9 Oct 2009

Ex-Brocade Chief to Pay $12.5 Million to Settle Backdating Case - Bloomberg

Ex-Brocade Chief to Pay $12.5 Million to Settle Backdating Case

By Karen Gullo

Oct. 10 (Bloomberg) -- Gregory Reyes, the former chief
executive of Brocade Communications Systems Inc. who won
reversal of convictions for backdating employee stock-option
grants, will pay $12.5 million to settle a company lawsuit over
his role in the options manipulation, court documents show.

Reyes breached his fiduciary duty to the company and
unjustly enriched himself in the backdating scandal, the company
claimed in the case filed in federal court in San Francisco.

Brocade, the largest maker of networking gear that connects
storage computers, wouldn’t be responsible for Reyes’s legal
bills or fines against him as of May 2 as part of the
settlement, according to the documents. Prosecutors could decide
to retry Reyes and he still faces a suit by securities
regulators.

The company spent at least $64.5 million on lawyers for
Reyes and other current and former employees involved in
lawsuits and investigations involving the option grants, plus
$35 million more for internal investigations, according to
company filings. The company also agreed to pay $160 million
last year to resolve shareholders’ securities-fraud claims over
stock-options backdating practices.

“The parties have resolved all matters between them,”
John Noh, a Brocade spokesman, said in a phone interview.

Richard Marmaro, Reyes’s attorney, didn’t return a voice-
mail message seeking comment yesterday.

San Jose, California-based Brocade is considering a sale, a
person familiar with the matter said this week.

SEC Lawsuit

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

Reyes, 47, had his 2007 conviction on charges he backdated
stock options thrown

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