Reyes sentenced….

I know, I know – but I just have trouble leaving this one alone. Last week the Brocade/Greg Reyes options backdating scandal came to an end (not really) and life in the world of business is now safe again (not really), right? Nope. Reyes got 21 months and fined $15 million clams. He remains free pending appeal.

So, knowing I should just shut up and move on, I can't. I was sure the judge would be forced to grant a new trial considering the primary witness to the primary prosecution claims of "he did it alone, deceiving everyone ever, especially those buffoon people in the finance department who were especially fooled by the scandalous, evil man…" (I made that up, but it's pretty much an accurate summation). The prosecution's sole witness within said finance department recanted her testimony, told the judge that she was pressured by the prosecution, and that she took back everything. The judge said he didn't care, that the testimony had no bearing on the jury's finding.

Here's the reason for my continuing my push against the tide – apparently the judge raised the "Enron" comparison when handing out the sentence. Enron? Are you kidding me? Comparing the flagrant theft of billions of dollars in a total global fraud on hundreds of thousands of unwitting, everyday people (stockholders and employees) for pure personal gain with a case like this is like comparing me to Tom Brady – sure we are both abnormally attractive, but that's where it ends.

In the prosecution's closing argument in the case (I read the transcript) that Reyes purposely deceived the finance department – a point hammered home 30 times in that one closing argument – making it impossible for Brocade's finance department to possibly account for those options properly. How could they account for them if they didn't know what was happening? They specifically said CFO Mike Byrd was a patsy and was totally left in the dark (which as anyone above the age of 8 knows is completely ridiculous) and had zero knowledge of such atrocities. Reyes, they said, was a mad financial genius with global malicious intent, in other words. At his sentencing, they again supposedly claimed that Brocade's option pricing practices were hidden from the finance department, and Byrd specifically, and thus they were deceived by Reyes.

Two days later, on January 18^th, 2008, the SEC filed a motion of opposition (Case 3:06-cv-04435-CRB Document 375 Filed 01/18/2008 ) against Byrd's motion to dismiss his case (which coincidently, was launched by the SEC only days after Reyes was convicted – in no small part because of the prosecution's countless references to the fact that Reyes acted alone and Byrd was totally duped), which in short claims (among other things):

Byrd's fraudulent conduct continued until he left in 2003.

Byrd's fraudulent conduct began in 1999.

Byrd's conduct helped conceal the backdating scheme.

Byrd instructed others to conceal the fraud.

Byrd's fraud helped conceal the fact that employees received in the money options that weren't properly accounted for.

So, if the case is based on the fact that Reyes acted alone, then that doesn't fit. If it were that he deceived everyone including Byrd, then that doesn't work. If it was because the prosecution's only witness claiming he deceived everyone in the finance department was deceived – and that it began in 2000, then that doesn't work (regardless of the fact that she is the one who then came forward after the fact to recant her testimony).

If you are really bored some day, you should read both of these cases, and I assure you that no matter your political persuasion, religious beliefs, your athletic prowess or your relative attractiveness, you will be mortified by the way this has all gone down. If it were a John Grisham novel, it would be too absurd to believe. This isn't supposed to happen in the good old U.S.A. What's next, Bill Gates has too much dough so we're going to make stuff up to take him down a peg or two? Doesn't that only happen in Russia?

Comments

[CiscoManager]

I read both cases. I agree with you. The problem was the jury, you can read about what the jury thought in this article.
http://californialawyermagazine.com/story.cfm?eid=890189&evid=1
First of all the jury went in to deliberations half of which thinking he was guilty. That means they were biased against CEOs. Second there were some lawyers on the jury, now that I have seen these various "white collar" cases, this only being one of them, I have concluded lawyers are the most self righteous self important group of parasites on the planet, who think convicting people for things like obstruction of justice as some kind of wierd catchall for anything, is OK. If you notice from reading that article, the jury didn't think the finance dept was deceived, and they convicted Reyes anyway. I don't know if the judge is briefed on the jury deliberations, but if he was, he would be unlikely to order a new trial because this jury didn't care. Its really incredible that this can happen, but it just shows you how screwed up things are, and there are a ton of people in the world that resent others because they are successful. Having said all this, one year isn't the worst sentence in the world.