Securities Law

CEO Intent Critical in Options Case


Federal prosecutors will file briefs this morning backing up their assertion that the former CEO of Brocade Communications acted with criminal intent when he authorized backdated stock options.

U.S. District Judge Charles Breyer ordered the briefs on Friday after the government wrapped up its case against Gregory Reyes, the Recorder reports. “In short form, I want to have some review of the evidence according to the prosecution of what is in the record showing the mens rea,” Breyer said.

Breyer acted after Reyes’ lawyer, Richard Marmaro, filed a so-called Rule 29 motion seeking dismissal of the case before it reaches the jury.

Prosecutors gave an advance look at their arguments as they answered Breyer’s questions on Friday, according to the article. They pointed to testimony by a lawyer who investigated the company’s option problems and by a former human resources executive.

The lawyer, Craig Martin of Morrison & Foerster, testified Reyes was aware of accounting implications related to stock options.

The HR employee, June Weaver, said Reyes once told her, “It’s not illegal if you don’t get caught,” but she couldn’t remember if he was speaking about stock options. She also testified she had sent Reyes an e-mail outlining the legal way to account for options.

Breyer asked the prosecutors about whether they had presented evidence that Reyes opened the attachment.

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