CEO convicted in Brocade stock options trial

SAN FRANCISCO -- The guilty verdict on all counts is an important validation of the Justice Department's options backdating probe, which has so far led to criminal charges against at least 10 executives. Reyes was the first executive to go to trial over backdating, and his case was seen as an important test of whether a jury considers it a crime deserving of jail time.

Reyes wiped his forehead with handkerchief and stared at the jury as the verdict was announced. His wife sobbed.

Reyes was charged with 10 felony counts of securities fraud accusing him of doctoring company records and lying to investors and auditors about the company's options practices to falsely boost Brocade's profit. The trial, which lasted six weeks, went to the jury July 30.

He could face decades in jail and millions of dollars in fines. Sentencing is scheduled for Aug. 21.

He was CEO of the data-storage network switch maker from 1998 to 2005.

Backdating refers to the practice of selecting favorable grant dates in the past when the company's stock price was low, and retroactively pegging awards to those dates. The goal is to boost the recipient's potential windfall, and it's only illegal if it's not properly accounted for.

Prosecutors say Reyes intentionally kept compensation expenses associated with Brocade's options awards off the company's books. His defense team says he didn't understand the accounting implications and relied on Brocade's financial department to properly record the expense.

Reyes was charged last summer along with Stephanie Jensen, Brocade's former vice president of human resources, with 12 felony counts each of securities fraud and other offenses. Two mail fraud charges were dropped for both defendants.