Securities Law

Stock-Options Defense Scores Points

A defense lawyer for the ex-CEO of Brocade Communications got support for his contention that backdating stock options causes no harm to companies in testimony at the San Francisco trial on Friday.

Steven Catricks, an analyst for Delaware Investments, testified that investors consider it important for companies to disclose noncash expenses such as in-the-money stock options, the Recorder reports. But on cross-examination, he admitted that the stock price of another company, Broadcom, went up when it restated more than $2 billion in expenses due to options backdating.

Catricks also said Delaware Investments sold stock of some companies with backdating problems, but held onto that of others, including Barnes & Noble, Home Depot and the Cheesecake Factory.

The testimony played into the defense advanced by Richard Marmaro, who is defending ex-Brocade CEO Gregory Reyes on charges that he improperly backdated stock options. Reyes is the first executive to be charged with securities fraud for backdating stock options to make them more lucrative for employees, noted in an earlier story.

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