LOS ANGELES, Aug. 10 LAWFUEL – Law News Network – Richard Marmaro, attorney for Gregory L. Reyes, former CEO of Brocade Communications, issued the following statement today on the occasion of Mr. Reyes’s indictment for securities fraud. Mr. Marmaro is a partner in the Los Angeles office of Skadden, Arps, Slate Meagher & Flom and head of its SEC and white-collar defense practice on the West Coast.
“Greg Reyes is innocent of the allegations in the indictment.
“The government made a mistake by seeking an indictment of Mr. Reyes.
It has misinterpreted the facts and drawn the wrong conclusions. We will
prove it when this case goes to trial.
“Mr. Reyes had no involvement in the development or the administration of Brocade’s stock options policies. Brocade was trying to compete in a tough market, and to provide valuable compensation for employees. Mr. Reyes awarded options to attract and retain high quality staff. At all times, he granted options appropriately.
“Mr. Reyes did not grant himself any options, he did not price his own options, and he did not exercise any of the options at issue in this case.
There was no theft or larceny, and no intent to defraud or mislead anyone.
There was no criminal intent whatsoever, and the government cannot prove
“There is no documentary evidence to support the government’s case
against Greg Reyes. We have reviewed more than 400,000 pages of material
that Brocade supplied to the government, and not a single document suggests
fraud. However, the documents do show that Brocade’s option-grant paperwork
was fraught with inadvertent errors made by employees in the company’s
Human Resources and finance departments.
“There was no material impact on Brocade from the options under
investigation for alleged irregularities. Brocade’s stock rebounded to its
pre-restatement price within four months. It actually increased by 17 per
cent on the day the final restatement figures were announced. Besides,
options expenses are non-cash expenses. Brocade thrived under Mr. Reyes’s
leadership, and it continues to thrive today. Indeed, Brocade just
announced Tuesday that it will acquire its closest competitor, McData
Corporation, for $713 million in stock.
“We have to wonder why the government is pursuing this case against
Greg Reyes. Their charges do not appear to be based on the facts or merits,
but on some perceived need to show quick action in response to the stock
option issues being reported in the media. When the government’s case goes
before a jury, it will fall apart. For one paramount reason: Greg Reyes did not commit securities fraud.