Gregory Reyes
Encyclopedia
Gregory Reyes is an American businessman who most recently served as the Chief Executive Officer (CEO) for Brocade Communications. He is the first person to have been convicted for fraudulent backdating of corporate stock options.
in Moraga, CA, where he obtained a degree in Business Administration in 1984. During his studies there, Reyes obtained an internship with Convergent Technologies (Unisys)
in its sales department. Reyes began working full time position at Convergent while taking evening classes in order to complete his degree. After obtaining his degree, Reyes became an OEM sales representative for Convergent, then left to become Vice President of Sales and Support at Banyan Systems, a networking and data communications software firm.
Reyes obtained his first CEO position with Wireless Access, a Silicon Valley start-up company specializing in two-way pagers. Reyes served as President and CEO until Wireless Access was bought out in 1997 by Glenayre Technologies.
In 1998, Reyes became the CEO of Brocade Communications, where he led the company to its Initial Public Offering
in 1999. As CEO of Brocade Communications, Reyes sold SAN (Storage Area Network
) infrastructure to a number of companies, including IBM, EMC Corp., Compaq, Dell, NEC, and HP.
During Reyes's time as CEO, Brocade was the largest manufacturer of networking equipment that provides data storage in the world. Under his leadership, the company went public in May 1999, growing from a small startup business into one of the largest and most successful technology companies in the Silicon Valley - a leadership position that it maintains to this day. Brocade showed 7 quarters of profitability and revenue growth during that time – in the first two years alone, revenue growth exceeded 150% altogether. In addition, Reyes actively pursued the recruitment of more than 1150 employees, multiplying the company’s workforce by a factor greater than six from 1999 to 2002.
Reyes resigned from Brocade when he was indicted by the U.S. government for accounting irregularities associated with corporate stock options backdating
. Reyes was originally convicted in 2007, but the conviction was overturned on appeal. He was retried in 2010, and again convicted; the second conviction was upheld on appeal.
Reyes is the first corporate official to be convicted of concealing stock options backdating in the United States.
, Massachusetts. They have two children.
.
In the trial, Reyes stated that he had no intent to deceive anyone, and that his decisions relied largely in good faith on the accuracy of documentation provided by Brocade's finance department, which incorrectly accounted for stock options in Brocade's financial statements that he signed in good faith and with the belief that they had been properly accounted for.
Elizabeth Moore, a key witness to Reyes's conviction and the only employee of Brocade’s finance department to be called during the proceedings, testified that neither she nor any other members of the finance department had any knowledge of backdating or fraudulent occurrences within the organization. After the trial’s conclusion, however, Moore recanted her testimony, claiming that she had been bullied and pressured by the prosecution to give false testimony. In a letter to Fortune Magazine she told an editor that she, as well as other high ranking members of the finance department, had been aware of the practice of backdating stock options to rank and file employees.
Moore's conflicting statements were not disclosed during the trial, and prosecutor Adam Reeves made numerous statements to the jury using Moore's testimony to support his argument that Reyes had deceived Brocade’s finance department; he presented a diagram to illustrate that no one in the finance department was aware of the backdating; he made statements in his closing arguments claiming that employees of the finance department did not have any idea that the backdating had occurred, adding that the government’s theory, based on their investigational findings, supported this conclusion.
Reyes filed a motion for a new trial on the grounds of prosecutorial misconduct, which was denied by the district court On January 16, 2008, Reyes was found guilty of 10 counts of fraud and conspiracy, including falsifying corporate accounting books and records, and participating in a stock options backdating scheme. Reyes was sentenced to 21 months in prison in addition to a $15 million fine, making him the first executive to be convicted of the concealment of stock options backdating.
On August 11, 2007 Reyes' was convicted on 10 counts of illegally backdating stock options while serving as CEO of Brocade. In January 2008, he was sentenced to 21 months in prison and received a $15 million fine. U.S. District Judge Charles R. Breyer
, the sentencing judge, refused to grant the defense request for a sentence of no more than 13 months, to be served in a halfway house rather than prison.
In the appeal, the National Association of Criminal Defense Lawyers
had supported Reyes with an amicus brief
urging reversal. Reyes was represented in the appeal by former U.S. Solicitor General Seth Waxman.
On March 26, 2010, the jury found Reyes guilty on 9 charges and was acquitted on the conspiracy charge. Reyes's attorney stated that Reyes will likely file another appeal. On June 24, 2010, Reyes was sentenced to 18 months incarceration and a $15 million fine. Reyes is incarcerated at the Taft Correctional Institution in Taft, California, with an anticipated release date of December 29, 2011. He appealed this second conviction to the Court of Appeals for the Ninth Circuit, which heard oral argument on May 10, 2011. The court affirmed the conviction October 13.
brought by Brocade shareholders on behalf of the company, in June 2009, for a reported $12.5 million.
Education and business career
After graduating from high school, Reyes attended Saint Mary's College of CaliforniaSaint Mary's College of California
Saint Mary's College of California is a private, coeducational college located in Moraga, California, United States, a small suburban community about east of Oakland and 20 miles east of San Francisco. It has a 420-acre campus in the Moraga hills. It is affiliated with the Roman Catholic Church...
in Moraga, CA, where he obtained a degree in Business Administration in 1984. During his studies there, Reyes obtained an internship with Convergent Technologies (Unisys)
Convergent Technologies (Unisys)
Convergent Technologies was an American computer company formed by a small group of people who left Intel Corporation and Xerox PARC in 1979....
in its sales department. Reyes began working full time position at Convergent while taking evening classes in order to complete his degree. After obtaining his degree, Reyes became an OEM sales representative for Convergent, then left to become Vice President of Sales and Support at Banyan Systems, a networking and data communications software firm.
Reyes obtained his first CEO position with Wireless Access, a Silicon Valley start-up company specializing in two-way pagers. Reyes served as President and CEO until Wireless Access was bought out in 1997 by Glenayre Technologies.
In 1998, Reyes became the CEO of Brocade Communications, where he led the company to its Initial Public Offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
in 1999. As CEO of Brocade Communications, Reyes sold SAN (Storage Area Network
Storage area network
A storage area network is a dedicated network that provides access to consolidated, block level data storage. SANs are primarily used to make storage devices, such as disk arrays, tape libraries, and optical jukeboxes, accessible to servers so that the devices appear like locally attached devices...
) infrastructure to a number of companies, including IBM, EMC Corp., Compaq, Dell, NEC, and HP.
During Reyes's time as CEO, Brocade was the largest manufacturer of networking equipment that provides data storage in the world. Under his leadership, the company went public in May 1999, growing from a small startup business into one of the largest and most successful technology companies in the Silicon Valley - a leadership position that it maintains to this day. Brocade showed 7 quarters of profitability and revenue growth during that time – in the first two years alone, revenue growth exceeded 150% altogether. In addition, Reyes actively pursued the recruitment of more than 1150 employees, multiplying the company’s workforce by a factor greater than six from 1999 to 2002.
Reyes resigned from Brocade when he was indicted by the U.S. government for accounting irregularities associated with corporate stock options backdating
Options backdating
Options backdating is the practice of issuing options contracts on a later date than that which the options have listed. While options backdating is not, in and of itself, an illegal practice, intentional backdating that coincides with low underlying stock prices and accounting reports that claim...
. Reyes was originally convicted in 2007, but the conviction was overturned on appeal. He was retried in 2010, and again convicted; the second conviction was upheld on appeal.
Reyes is the first corporate official to be convicted of concealing stock options backdating in the United States.
Personal life
Reyes met his wife in BostonBoston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
, Massachusetts. They have two children.
Charges
In June 2005, Brocade announced that the U.S. Securities and Exchange Commission had undertaken an investigation the company stock option accounting. In August 2006, the U.S. government indicted Reyes on 12 counts of securities fraud, two of which were later dropped.First trial
Reyes's trial began on June 18, 2007, making it the first criminal trial in which a backdating prosecution was considered before a juryJury
A jury is a sworn body of people convened to render an impartial verdict officially submitted to them by a court, or to set a penalty or judgment. Modern juries tend to be found in courts to ascertain the guilt, or lack thereof, in a crime. In Anglophone jurisdictions, the verdict may be guilty,...
.
In the trial, Reyes stated that he had no intent to deceive anyone, and that his decisions relied largely in good faith on the accuracy of documentation provided by Brocade's finance department, which incorrectly accounted for stock options in Brocade's financial statements that he signed in good faith and with the belief that they had been properly accounted for.
Elizabeth Moore, a key witness to Reyes's conviction and the only employee of Brocade’s finance department to be called during the proceedings, testified that neither she nor any other members of the finance department had any knowledge of backdating or fraudulent occurrences within the organization. After the trial’s conclusion, however, Moore recanted her testimony, claiming that she had been bullied and pressured by the prosecution to give false testimony. In a letter to Fortune Magazine she told an editor that she, as well as other high ranking members of the finance department, had been aware of the practice of backdating stock options to rank and file employees.
Moore's conflicting statements were not disclosed during the trial, and prosecutor Adam Reeves made numerous statements to the jury using Moore's testimony to support his argument that Reyes had deceived Brocade’s finance department; he presented a diagram to illustrate that no one in the finance department was aware of the backdating; he made statements in his closing arguments claiming that employees of the finance department did not have any idea that the backdating had occurred, adding that the government’s theory, based on their investigational findings, supported this conclusion.
Reyes filed a motion for a new trial on the grounds of prosecutorial misconduct, which was denied by the district court On January 16, 2008, Reyes was found guilty of 10 counts of fraud and conspiracy, including falsifying corporate accounting books and records, and participating in a stock options backdating scheme. Reyes was sentenced to 21 months in prison in addition to a $15 million fine, making him the first executive to be convicted of the concealment of stock options backdating.
On August 11, 2007 Reyes' was convicted on 10 counts of illegally backdating stock options while serving as CEO of Brocade. In January 2008, he was sentenced to 21 months in prison and received a $15 million fine. U.S. District Judge Charles R. Breyer
Charles R. Breyer
-Early life and career:Born in San Francisco, California, Breyer received an A.B. from Harvard College in 1963 and a J.D. from the University of California, Berkeley, Boalt Hall School of Law in 1966. He was a law clerk to Oliver Carter of the U.S. District Court for the Northern District of...
, the sentencing judge, refused to grant the defense request for a sentence of no more than 13 months, to be served in a halfway house rather than prison.
Appeal
In August 2009, The Ninth Circuit Court of Appeals reversed Reyes's conviction due to prosecutorial misconduct in making a false assertion of material fact in its closing argument to the jury. In October 2009, federal prosecutors requested the Ninth Circuit to strike its finding of prosecutorial misconduct, but declined to request that the court reverse the judgment itself; that request was denied November 6. In December 2009, Northern California legal newspaper The Recorder reported that prosecutors had reached a decision to retry Reyes.In the appeal, the National Association of Criminal Defense Lawyers
National Association of Criminal Defense Lawyers
The National Association of Criminal Defense Lawyers is an American criminal defense organization. Their stated mission is to "Ensure justice and due process for persons accused of crime. Foster the integrity, independence and expertise of the criminal defense profession...
had supported Reyes with an amicus brief
Amicus curiae
An amicus curiae is someone, not a party to a case, who volunteers to offer information to assist a court in deciding a matter before it...
urging reversal. Reyes was represented in the appeal by former U.S. Solicitor General Seth Waxman.
Second trial and appeal
Reyes's second backdating trial (or retrial) commenced on February 22, 2010, in U.S. District Judge Charles Breyer's court room. Reyes was charged with 1 count of falsifying books and records, 4 counts of lying to auditors, 4 counts of security fraud, and 1 count of conspiracy.On March 26, 2010, the jury found Reyes guilty on 9 charges and was acquitted on the conspiracy charge. Reyes's attorney stated that Reyes will likely file another appeal. On June 24, 2010, Reyes was sentenced to 18 months incarceration and a $15 million fine. Reyes is incarcerated at the Taft Correctional Institution in Taft, California, with an anticipated release date of December 29, 2011. He appealed this second conviction to the Court of Appeals for the Ninth Circuit, which heard oral argument on May 10, 2011. The court affirmed the conviction October 13.
Civil proceedings
In addition to the criminal proceeding, Reyes has also been named in several civil lawsuits in state and federal courts, stemming from the backdating, including one federal suit filed by the U.S. Securities and Exchange Commission, which he settled in August 2011 for $845,000. Reyes settled one of the other suits, a derivative suitDerivative suit
A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are unique because under traditional corporate law,...
brought by Brocade shareholders on behalf of the company, in June 2009, for a reported $12.5 million.
External links
- United States v. Reyes, no. 08-10047 (9th Cir. Aug. 18, 2009); Ninth Circuit opinion reversing Reyes's conviction on the ground of prosecutorial misconduct
- Brocade
- Greg Reyes CEO
- U.S. Department of Justice
- U.S. Securities and Exchange Commission
- Realtime updates from the Gregory Reyes trial
- "Greg Reyes"