Former CEO Greg Reyes Faces Federal Prison - What Can He Expect? Comments By Business Ethics Speaker Chuck Gallagher
Former Brocade CEO, Greg Reyes was convicted in August 2007 of defrauding investors in the first case of backdating stock options. Since the Department of Justice began its backdating probe well over 10 executives have been criminally charged. The Reyes case was considered important as it tested whether a jury feels the crime is worthy of jail time.
As the verdict was read - the DOJ got its answer. Yes!
Now some five months later, Greg Reyes has been sentenced to 21 months in federal prison and ordered to pay a $15 million fine for his role in the stock-options backdating scandal. Reyes was not the only person from Brocade that has been convicted. In December former human-relations head, Stephanie Jensen, was convicted on separate backdating related charges.
According to the White Collar Crime Prof Blog: “Reyes will remain free on bond pending appeal, with Judge Breyer acknowledging that because this was the first options backdating case to go to trial there were novel legal issues involved. It is unlikely Reyes will have to report to prison for at least a year, assuming the conviction is upheld. The sentence certainly sends a message to other defendants charged in backdating cases that they are likely to face prison terms if convicted. And, unlike the Reyes case, other prosecutions involve defendants who benefited from the backdating, so the loss (or gain) issue will not be resolved quite as favorably as it was in this case if there is a conviction.”
What Can He Expect?
He will likely be incarcerated in a minimum security facility. Some call that “club fed.” Having been there myself (not something I am proud of) I can assure you it is “fed” - it is no “club.” After his initial processing, he will be introduced to the general population, most of which will be drug dealers. White collar criminal are not segregated and all placed in a location together.
He will be counted six times (or more) per day and at least one of those counts will be a standing count so the guards can see that you’re alive. His day will begin at 6:00 a.m. with a set time for breakfast. If you miss the meal - you don’t eat. The rules are clear, simple and enforced.
He will be assigned a job. All inmates must work (and be paid). I earned 12 cents per hour. Since that was 13 years ago, one might wonder if inflation has increased that? Either way, the duties won’t be fun - manual labor mostly. He will be allowed no computer access and his calls will be monitored.
Reyes will have time on his hands to think - think about whether the gain from backdating options was worth the loss of his position, loss of his freedom and the loss of financial gain.
Most importantly Greg Reyes will have the time to think about what choices he can make when he is released that will make a difference.
Following prison:
Most people assume that upon release life will be difficult. It will be a challenge. But, as a business ethics speaker (see Demo Video on YouTube) I know from personal experience that one can accomplish significant thing based on the choices one might make. As founder of the Choices Foundation, I routinely speak to youth groups about the choices they make and the consequences that follow. I share with them the Truth About Consequences.
Perhaps as Reyes faces him time in Federal prison, he will find within himself the courage to make a difference in the lives of others when he’s released. Perhaps he’ll use this time find out what true success really means.
February 5, 2008 at 2:39 pm
i actually have a question….why does it take so long to enforce the sentence? I realize that he is going to appeal but is there a set time for appeals? Do you think he will do some time? thanks!!
July 23, 2008 at 11:35 am
the legal system in the us is not fast. it isn’t the fault of the judges etc.. there simply isn’t enough funding in the system to handle the case load in a timely manner. as to why he isn’t in jail during the appeals process: it’s because there are substantial problems with the government case against him. witnesses have reversed their testimony, jurors have indicated that they think they came to the wrong verdict, there is evidence of prosecutorial misconduct on the part of the us attorney… and even if none of that turns out to reverse the decision, it is quite possible that the appeals court will hold that the trial court applied the law incorrectly. after all, what greg did vis a vis backdating wasn’t actually a crime. let me restate that: it is NOT a crime to backdate options. it is a crime to do so and then fail to account for it properly. but greg was not brocade’s accountant. that was mike byrd. so greg’s legal team contends that the government was actually prosecuting the wrong guy. it is possible that the appeals court will find that position to have merit. anyway, the trial judge felt that there were so many appealable issues in the case that there was a reasonable chance that it might turn out that greg didn’t commit any crime, and thus might not have to go to jail. in this case, it would be patently unfair to have him serve time while the appeal went forward. but only a few percent of appeals are successful. even with the facts and the law on his side, he still has only a 1 in 10 chance or so, and it is most likely that an innocent man will go to jail. also, i have to point out that greg did not gain financially from the backdating. not one single penny. that was proved during the trial, so i’m not sure why the author of the original article implies that greg had gains associated with wrongdoing.