There’s a kind of hush all over Silicon Valley today and in other places where people are suspected of illegally backdating stock options. People have a reason to be afraid, because federal prosecutors have won the first case of backdating offenses brought to trial.
Gregory Reyes, who served as president and CEO of Brocade Communications Systems from 1998 to 2005, is the new poster boy of corporate greed and malfeasance after being convicted yesterday on 10 felony counts of conspiracy and securities fraud. Reyes maintains his innocence, and his attorney promises a vigorous appeal. Stephanie Jensen, a former HR executive at Brocade, is awaiting trial on similar charges.
So, who’s afraid of the Justice Department now?
1. Kenneth Schroeder, former CEO of KLA-Tencor, who’s under indictment for federal civil fraud charges for his role in backdating options.
2. Robert Therrien, former chairman and CEO of Brooks Automation, who’s under indictment for federal income tax evasion, relative to gains from exercising stock-option grants. (Some of the directors who granted those options to Therrien could be in trouble with the long arm of the law, too, although no formal charges have been brought against any present or former directors of Brooks Automation.)
3. Carole Argo, the onetime COO/CFO of SafeNet, who’s under indictment for federal fraud and conspiracy charges, again related to options backdating.
Those three are the beneficiaries of more than a year of investigations by the SEC and the Department of Justice, and following deliberations by federal grand juries. They won’t be the last to face a true bill and a jury of their peers in this ongoing scandal. Other executives and directors have already pleaded guilty to federal charges and will be testifying against their former colleagues in future trials.
All I can say is: Bring it on!
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