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” (here, subscription required) the attorneys for Gregory Reyes, the former CEO Brocade Communications who faces criminal charges in connection with stock option activity at Brocade, present their view that “most options backdating cases” are “not fraud, but books and records errors.” They recite that Steve Jobs, the CEO of Apple who faces his own set of questions about options grants at his company, like their client, is a “non- accountant who didn’t personally benefit one cent from the options grants at issue.” They go on to state that the “problem with the government’s theory is that it “conflates books and records violations with criminal securities fraud.” The government thus “untethers securities fraud from the legal elements that safeguard executives from conviction from inadvertent accounting violations resulting in little or no harm to companies or investors.” The authors go on to assert that “there is no proof of deceit or concealment in alleged backdating cases,” and that the backdating was “actually undertaken in good faith” arising from the high volume of options grants that led to “paperwork errors.” While the authors’ essay is most directly intended to exonerate their client, their arguments join a chorus of other voices that have contending that options backdating in general is not illegal and the current proecutorial zeal to prosecute backdating is a combination of government (and media) overreaction and failure to understand the practical and legal ramifications of backdating.… continue reading »

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