Greg Reyes was convicted of all charges in the Brocade backdating criminal case. As Lattman says:
Reyes was seen as an important test of whether a jury considers it a crime deserving of jail time. * * * His conviction could embolden prosecutors in their ongoing options investigation. The government has reportedly been looking at filing criminal charges against former executives at Apple, KLA-Tencor and Broadcom, companies that have all acknowledged stock options shenanigans.
The thought of more of these misguided criminal prosecutions of backdating is disturbing, to put it mildly. As I've said repeatedly, criminal prosecutions are a wildly inappropriate way to deal with any wrongs that occurred in these backdating cases. The nuances in the cases, and the lack of any need for criminal trials, are well illustrated by the careful Delaware opinions that have already been issued in other backdating-type cases – e.g., the Strine opinion in Desimone discussed here, with links to earlier Chandler opinions. (Indeed, to describe these a "backdating-type" itself deals with these cases too generally, as VC Strine makes clear.)
These problems with criminalization of backdating are especially striking in a case like Brocade, where the defendant was trying to maximize shareholder value by recruiting the best people, not line his pockets, and where it's unlikely any misstatements hurt investors, as discussed here.
The prospect of more backdating trials means we'll see the corporate crime lottery play out in backdating cases. In particular, will the fickle finger of justice fall on Steve Jobs, whose case looks at least a little like that of Reyes, as discussed here? Or will Jobs continue to get the benefit of the Apple Rule, and escape jail based on a subtle difference in how much he knew about the accounting?
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