Silence enveloped a San Francisco courtroom Tuesday after a jury dealt once-powerful high-tech executive Gregory Reyes a devastating blow by finding him guilty on all counts, ending the nation’s first criminal trial over the backdating of stock options.
After six days of deliberation, the jury handed the federal government a resounding victory. Reyes could face up to 20 years in prison for the most serious charges and millions of dollars in fines.
He was convicted of misleading Brocade company shareholders between the years 2000 and 2004 by conspiring to alter the grant dates of stock options awarded to employees and falsifying company documents, including financial statements.
Sentencing is scheduled for Nov. 21.
The verdict sent shudders through Silicon Valley where executives have been implicated in the backdating scandal. Reyes’ conviction offers the first proof that a jury would consider backdating a crime.
It clearly shocked the former chief executive officer of Brocade Communications Systems Inc. and part owner of the San Jose Sharks, along with the members of his defense team, who visibly slumped in their chairs. Reyes, in a dark suit and blue tie clasped his hands in front of him, attentive as he was throughout the trial. The only visible sign of distress: His ruddy complexion blanched under the fluorescent glow.
Federal prosecutors, who had argued during five weeks of testimony that Reyes, 44, was the criminal mastermind behind the alleged conspiracy, remained upright and impassive as his wife, Penny, and two jurors openly wept while the court clerk read aloud the guilty verdict in each of the 10 fraud counts.
Moments later, as court adjourned, Reyes wrapped his arms around his wife, kissing her cheek and murmuring comforting words. Reyes left the courtroom without a word. His lawyer, Richard Marmaro, said he was in total shock. Later in a statement, he vowed to appeal. “Today, we are disappointed,” he said. “Tomorrow, we will continue the fight.”
Some of the jury, which consisted of three men and nine women, appeared strained and distraught. They all refused to shed light on their deliberations, dodging reporters as they left the courthouse. Assistant U.S. Attorneys Tim Crudo and Adam Reeves, who tried the case, also declined to comment.
“The jury’s verdict recognized that backdating option grants with an intent to deceive as done in this case is a crime,” interim San Francisco U.S. Attorney Scott Schools said in a statement. “Such backdating can result in overstating earnings and misleading potential investors. Shareholders, large and small, rely on the accuracy of the information provided to them by public companies like Brocade.”