As reported by the Associated Press, the former chief executive of storage-switch vendor Brocade Communications Systems Inc. was formally charged this afternoon with fraud, the first indictment in stock-options probes involving allegations of option backdating at more than 55 U.S. companies.
Gregory L. Reyes, who resigned in 2005 after an internal company audit uncovered improper accounting of stock options, now owns the ignominious distinction of being the first past or present chief executive to be charged criminally as a result of investigations. Stephanie Jensen, Brocade’s former vice president of human resources, was also charged. Brocade has attempted to dissociate itself from Reyes since his alleged malfeasance came to light, and these new charges will open old wounds all over again.
In addition to facing criminal charges, Reyes and Jensen also will be slapped with civil charges by the Securities and Exchange Commission (SEC). This news will send a jolt of fear and trepidation throughout Silicon Valley, as many companies await news on ongoing investigations into their own alleged backdating practices.
Apparently, the SEC tipped its hand regarding its intentions, inviting journalists to its press conference by sending them a file named “brocademedia.com.”