FOR IMMEDIATE RELEASE
|2004:||Net loss increased from $2 million to $32 million|
|2003:||Net loss increased from $136 million to $147 million|
|2002:||Income increased by $60 million to $126 million|
|1999-2001:||Income declined by a total of $304 million|
The Commission’s civil complaint also names Antonio Canova, Brocade’s former CFO, who is alleged to have learned of the backdating after joining Brocade. According to the complaint, Canova was specifically warned in writing that option paperwork had been forged to enable an employee to get favorably priced options; he took no action and failed to advise Brocade’s auditors and Audit Committee. The complaint alleges that despite this knowledge, Canova signed Brocade’s false and misleading financial statements and SEC filings.
U.S. Attorney Kevin V. Ryan stated, “The criminal charges filed today allege that this backdating scheme contributed to the restatements of hundreds of millions of dollars of Brocade’s financial results. The criminal complaint alleges that these defendants altered and backdated Board of Director meeting minutes and employment offer letters in a scheme to defraud in connection with the pricing and granting of stock options. It is integral to the public trust in our financial markets that books and records are maintained honestly, and that the true financial condition of public companies is disclosed accurately.”
Linda Chatman Thomsen, Director of the Commission’s Enforcement Division in Washington, D.C., said, “By falsifying and backdating option paperwork, Reyes and Jensen knew investors would be given a false portrait of Brocade’s financial condition. Canova contributed to this false portrait by continuing to certify Brocade’s false filings even after learning option paperwork had been forged. The Enforcement Division is committed to pursuing this type of unlawful stock option manipulation.”
Acting Special Agent in Charge Arthur Balizan said, “This complaint demonstrates the strong, cooperative relationship between the FBI, SEC and US Attorney's office, and the successful advancement of justice achieved by these types of parallel investigations. The illegal backdating of options alleged in this case gave the defendants an unfair advantage and misled the investing public.”
The criminal complaint, filed in federal court in San Francisco, charges Reyes and Jensen with securities fraud. The Commission’s civil complaint, filed in federal court charges Reyes, Canova, and Jensen with fraud and other violations of the federal securities laws, including the books-and-records, internal controls, misrepresentations to auditors, and Sarbanes-Oxley certification provisions.
Reyes and Jensen will be issued a summons to appear in court on August 2, 2006, before Magistrate Judge Joseph C. Spero.
The maximum statutory penalty for securities fraud in violation of 15 U.S.C. §§ 78j(b), 78ff and 17 C.F.R. § 240.10b-5 is 20 years in prison and a fine of $5 million, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
A criminal complaint contains only allegations against an individual and, as with all defendants, Mr. Reyes and Ms. Jensen must be presumed innocent unless and until proven guilty.
Christopher J. Steskal is the Assistant U.S. Attorney who is prosecuting the case with the assistance of legal assistant Miche Sharpe.
The investigations are continuing.
A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.
Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.
Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.
All press inquiries to the U.S. Attorney’s Office should be directed to Luke Macaulay at (415) 436-6757 or by email at Luke.Macaulay@usdoj.gov.
Further Information Regarding the Commission’s Complaint:
Patrick T. Murphy
Robert S. Leach
San Francisco District Office
Securities and Exchange Commission
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