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.


14 Responses to Former CEO Greg Reyes Faces Federal Prison – What Can He Expect? Comments By Business Ethics Speaker Chuck Gallagher

  1. cathy says:

    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!!

  2. josh says:

    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.

  3. Raul says:

    I have an observation to make, why is it that Greg Reyes gets sent to prison and no one else that backdated is going there? Backdating options was the bread and butter of the tech industry during the boom, Greg Reyes didn’t even profit from the backdating. Others CEOs that backdated options and profited from it are paying an SEC fine and quietly retiring.
    Too bad Greg Reyes wasn’t named Greg Smith.

  4. Egbertt says:

    Mr. Dempsey is the real man to blame for the Brocade stock option debacle. Sure, Mr. Greg Reyes is a crook, but Mr.Neal Dempsey who was on the committee and a confidant of Mr. Reyes should be
    implicated for his role in this conspiracy to defraud ordinary shareholders
    for millions of dollars. He was the major stock holder in Brocade and his Venture Capitol firm Bay Partners knew exactly what they were doing! Mr. Dempsey has consistently demonstrated a pattern of
    committing to a plan and executing another and getting rewarded for failure.
    Through his hey days in the early 90’s, I worked with Mr. Dempsey. I am
    guilty of not blowing his cover because my enterprise went on to make me considerable
    wealth and I chose the path to enjoy the wealth. Mr. Dempsey rarely showed up
    to Board meetings, when he did, he did not contribute much to my business. He
    was good at taking the other board members out to expensive restaurants and
    inserting himself in different processes. But his value add on my board was
    a little less than zero.Yes, it is a rant. I am trying to demonstrate a consistent pattern of
    incompetence that leads to borderline legal behavior to cover up for the
    incompetence. He is a liar and he knows it!
    Stay tuned – I have time on my hand to go unearth more about Mr. Dempsey.

  5. BRCD DUDE says:

    I worked for Greg Reyes. The damage is done to his brand name. but make no mistake about it. he is a brand. If i could work for him again i would do it. he is an excellent leader of people. too bad he got caught up in this mess.

  6. Egbertt says:

    Well I worked for Dempsey and I must say I know for a fact that Reyes is taking most of the heatfor what the others did ….Dempsey was on the board and was the Director and he knew what Greg was doing & I am willing to bet he ws the real man behind this scheme. He made money almost over night with Brocade and no one knows how….he is worse than a common theif!

    Yesterday Judge Charles Breyer was to rule on the 160 million settlement that all the partners Dempsey, Neiman, Canova and others are trying to worm their way out of to wash their hands of the whole thing….. I wonder what was the final verdict?

    Anyone know?

  7. Sharon Nul says:

    Where is Mr. Reyes now?

  8. Lejon says:

    I worked for Greg as well! I completely agree with “BRCD DUDE”! If I could, I would work for him again!! He is the BEST leader I have ever seen and worked for! I have 25 years professional IT career (see a lot) behind me :-).
    Good question, where is Greg now?

  9. Ryan says:

    I think he is still trying to fight his way out of jail. I just read the CFO involved in the company Antonio Canova was given a slap on the wrist and wormed his way out of the can by paying $367k….the same goes for Sonsini who is a lawyer, obviously won’t see jail time. Although if anyone should go to jail they should. As for Reyes, I know he was a good guy and all but he told the board of directors NEal Dempsey exatcly what he was doing and Neal diliberatly ignored his calls, offered him a 30 million dollar buy out , took his company away and turned him in. When the goverment caught up with them, Dempsey thought he would get off because he came clean. Kind of like admittiong you robbed a bank . Well on 9/11 alone bothe rDempsey and Reyes being the oportunists they are used the fact that the stock market was closed and made money by backdating in those days alone…..they are both crooks but unfortunately, in this world crooks with money get off and innocent people end up suffering!

  10. Kelly says:

    Innocent people end of suffering? Reyes backdating never affected anyone negatively and Reyes never personally benefited. He is a good guy!

  11. Roary says:

    What kind of punishment do you think the US Attorneys should get? Since they were found out to have committed prosecutorial misconduct, lying to the jury about the case, during the trial? Which by the way lead to the over turning of the conviction.

  12. Jessica Schnarr says:

    That is a very nice article. I really think it will turn out to be a very crucial piece of information in the future for me.

  13. Diane Fox says:

    I’ve been following Gregory Reyes case for a while now. IMHO he has been judged for something that is not even a crime and thousands of companies currently do.

  14. form 8917 says:

    form 8917…

    […]Former CEO Greg Reyes Faces Federal Prison – What Can He Expect? Comments By Business Ethics Speaker Chuck Gallagher « Motivational Speaker – Chuck Gallagher Business Ethics and Choices Expert[…]…

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