A former Silicon Valley chief executive’s conviction in a stock options backdating case was upheld by a federal appeals court in San Francisco today.
Gregory Reyes, 49, of Saratoga, a former part-owner of the San Jose Sharks ice hockey team, was chief executive officer of San Jose-based Brocade Communications Inc., a data storage networking company, from 1998 to 2005.
He was convicted in federal court in San Francisco last year of nine counts of securities fraud, submitting false filings to the U.S. Securities and Exchange Commission, falsifying company records and making false statements to accountants between 2000 and 2004.
The offenses were committed in connection with Reyes’ grants of backdated stock options to employees. Backdating is the practice of allowing employees to buy company stock retroactively at a lower price.
Backdating is not illegal in itself, but it is a crime to fail to disclose it as an expense in company records and SEC filings.
Reyes was sentenced by U.S. District Judge Charles Breyer to 18 months in prison. He is currently serving the sentence and is scheduled to be released on Dec. 29, according to federal prison records.
The conviction was upheld today by the 9th U.S. Circuit Court of Appeals, which rejected Reyes’ appeal claims of prosecutor misconduct, insufficient evidence and instructional errors.
Last year’s trial was Reyes’ second. He was found guilty of a total of 10 charges in an earlier trial in Breyer’s court in 2007, but that conviction was overturned by the 9th Circuit.
The earlier trial was the first in the nation to be held in connection with a nationwide probe of stock options backdating by the U.S. Justice Department and the SEC.
In August, Reyes agreed to settle a related civil lawsuit by the SEC by paying a $550,000 fine plus $295,000 in relinquishment of profits and interest.