Ex-Brocade exec gets four months in options case

Former personnel director plans to appeal ruling, which includes prison time and a $1.25 million fine.(From Reuters)
Written by Natalie Gagliordi, Contributor
Brocade Communications Systems' former personnel director was sentenced to four months in prison on Wednesday for backdating stock-options awards for employees.

Stephanie Jensen, 50, was also sentenced to one year of supervised release after serving her prison term and fined the maximum of $1.25 million. She must spend the first three months after her release in a halfway house.

Judge Charles Breyer of U.S. District Court in San Francisco allowed Jensen to remain free pending an appeal. Jensen and her lawyers declined to comment after sentencing.

Jensen is the second person found guilty of criminal charges related to manipulation of stock option grants in a widespread scandal that has led to billions of dollars in financial restatements and ensnared more than 200 U.S. companies in the past two years.

A jury convicted Jensen in December of one count of falsifying company books and one count of conspiracy. Brocade's former chief executive, Gregory Reyes, was sentenced in January to 21 months in prison and fined $15 million after a jury convicted him in August of 10 counts related to backdating. He is free pending an appeal.

Breyer said Jensen's sentence should deter others and encourage them to report corporate misconduct.

He told the former vice president of human resources that her sentence should send "a message to individuals who may be confronted with a situation very similar to the one you were confronted with, and that if they don't say 'no,' they are going to spend a lifetime regretting the decision they have made."

Jensen told Breyer she regretted her conduct and its consequences for her family and Brocade, the leading maker of switches for corporate data storage networks and a high-flying start-up in the technology boom of the late 1990s.

"We were trying to build a great company," Jensen told the judge. "I was proud to share in that effort. I accept responsibility for my actions and their impact on others."

At least five other former executives at U.S. companies including Take-Two Interactive Software and Comverse Technology have pleaded guilty to backdating charges and been sentenced.

Jensen's lawyer, Jan Nielsen Little, had sought probation, community service, and a fine for her client, while prosecutors Timothy Crudo and Adam Reeves had sought a prison sentence of six months.

Jensen "had hundreds of thousands of her own Brocade options at stake, and Reyes had made her a multimillionaire several times over," Crudo and Reeves wrote in a court filing before the sentencing.

"The facts, and her own admissions, demonstrate that she was selfish and knowledgeable, not naive and inexperienced" as the defense contended, Reyes and Crudo wrote.

Backdating of option grants is legal as long as it is disclosed and accounted for in company books. U.S. authorities said Reyes and Jensen illegally inflated Brocade's earnings from 2000 to 2004 by hiding its backdating practice from investors and regulators.

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