While critics have painted Reyes as arrogant and even greedy, supporters defended him as the victim of a witch hunt over technical accounting rules that some view as distractions, in an industry where stock options have allowed many engineers and entrepreneurs to strike it rich.
Many tech companies reward employees by giving them options to buy stock, usually at the price for which shares were selling on the day the options are granted.
But in preliminary motions, government attorneys have indicated they may now argue that Reyes had a personal motive for his actions, as both sides gird for a bitter rematch after Reyes’ conviction for securities fraud was overturned last year.
“Reyes’ own stock option grants show that he was getting his piece of the action,” Assistant U. Attorney Adam Reeves said in papers filed this month in San Francisco’s federal court, where the new trial begins Monday.
Backdating can make options more valuable by retroactively setting them at a lower price.Reyes was charged last summer with 12 felony counts of securities fraud and other offenses.Brocade's former vice president of human resources, Stephanie Jensen, was also charged with 12 counts. The government alleges the two illegally concealed that Brocade was awarding "in the money" grants — or options that already had value when they were given, thus requiring the company to incur compensation expenses.As they gear up for a second shot at a once-rising Silicon Valley star, federal prosecutors are signaling they may shift strategy by alleging that former Brocade Communications CEO Greg Reyes boosted his own income, potentially by millions of dollars, with a scheme to conceal backdated stock options.Prosecutors did not focus on that argument during Reyes’ first trial in 2007, and defense attorneys have repeatedly said he never profited from what they described as a harmless and widely used method of rewarding Brocade employees.