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The company did not admit or deny any allegations in the SEC’s complaint. “The stock price was on a downward trend,” Gulley said.īrocade has since settled for $7 million an investigation by the Securities and Exchange Commission into its historical stock options granting practices.
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He also agreed that during 2005, Brocade’s shares never recovered from their opening price on Jan. 6, 2005, it would have to restate its financials because of its stock options granting practices. Attorney Tim Crudo, Gulley conceded that shares of the San Jose-based networking storage company did indeed fall 7 percent when the company disclosed on Jan. A hedge fund manager who previously owned nearly $500 million in Brocade securities said he also did not consider non-cash expenses, such as the cost for stock options compensation, when buying a company’s stock.īut under cross examination by Assistant U.S. Gulley’s testimony was meant to bolster one of the defense’s arguments: that investors were not harmed by inaccurate accounting at Brocade, because investors typically do not consider non-cash expenses to be an important factor when making investment decisions. “My conclusion is that the stock market does not believe that expensing stock options is all that important,” said David Gulley, an economist with Navigant Consulting at its New York offices. Reyes, 44, the former chief executive of Brocade, faces charges of misleading investors and regulators in a conspiracy to defraud investors, and failing to disclose the true impact of granting discounted options on Brocade’s financial statements from 2000 to 2004.
#Brocade investor relations trial
Witness in trial of former Brocade CEO says investors unmoved by options scandal – The Mercury News Close MenuĪn expert witness for the defense in the trial of Greg Reyes testified Monday that investors in Brocade Communications Systems ultimately shrugged off their concerns over the impact of the cost of stock options backdating on the company’s financials.