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.
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.