Gregory Reyes, the former head of Brocade Communications Systems Inc., was convicted of conspiracy and fraud after six days of deliberations in San Francisco federal court, U.S. media reported Wednesday.
Reyes was found guilty of 10 counts of conspiracy and fraud in a trial over the improper backdating of stock option grants, becoming the first chief executive convicted by a jury in a broad U.S. crackdown on the practice.
Brocade is the largest maker of switches for data-storage networks in U.S.
The U.S. ensnared at least 50 companies in its probe of backdating, a practice by which companies change the grant date to a day with a lower stock price, giving recipients built-in profits when they exercise their right to buy stock. Unless disclosed and recorded as an expense, the practice is illegal because it hides costs, prosecutors said during the trial.
U.S. Securities and Exchange Commission eventually investigated about 140 companies in connection with the practice, and federal prosecutors filed charges against at least five executives.
Shares of Brocade, fell 5.5 percent to a six-month low, and Reyes faces millions of dollars in fines and up to 20 years in prison for the most serious charges.
"This is a pretty big win for the government," said Peter Henning, a former federal prosecutor who teaches securities law at Wayne State University Law School in Detroit. "It may well encourage more cases or push some investigations forward."
source:news.xinhuanet.com
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