Floyd Norris
The closely watched criminal trial of Gregory Reyes, the former chief executive of Brocade Communications ended in a conviction today. He was accused of backdating option grants.
Mr. Reyes’ defense was a classic. His lawyers did not argue that he did not do it. Instead, they argued that lots of people in the company knew it was going on, and that the government had not proved that Mr. Reyes understood options accounting rules. If he did not know what he was doing was wrong, then there could be no crime.
The judge had put off a ruling on whether to dismiss the case, and some thought he had bought the argument. But today he said he had rejected the dismissal motion.
Mr. Reyes’ defense might have had a better chance if he had not denied backdating when questioned by company investigators. And he was hurt when an employee quoted him as saying “It’s not illegal if you don’t get caught.”
The basic CEO defense of “I was too important to worry about accounting details” would have become very popular if it had worked.
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