Brocade Exec Guilty in Stock Option Case
Wednesday, December 5, 2007; 9:48 PM
SAN FRANCISCO -- The former vice president of human resources at Brocade Communications Systems Inc. was convicted Wednesday in the company's second criminal stock options backdating case to go to trial.
After deliberating for one day, a federal jury in San Francisco found Stephanie Jensen guilty of conspiracy and falsifying corporate records, the only charges she faced.
Jensen, who wiped away tears as the verdict was read, is to be sentenced March 12. She faces up to 20 years in prison, prosecutors said.
After the judge and jury left the courtroom, Jensen sobbed for several minutes while embracing her husband, Greg. Jensen and her lawyer, Jan Little, both declined to comment.
Prosecutors said the verdict underscores the importance of pursuing executives believed to have engaged in options-related accounting shenanigans.
"The integrity of our stock markets depends on the accuracy of the books and records of a public company. Accordingly, prosecuting securities fraud and manipulation will remain one of this office's top priorities," U.S. Attorney Scott Schools said in a statement.
Jensen, 50, who worked at Brocade from 1999 to 2004, is one of about a dozen executives from different companies who have been criminally charged by the Justice Department over alleged tampering with stock option awards _ a practice that hides the true costs of those awards from investors.
The government's crackdown on options cheaters, launched last year, is based on accounting rules that require public companies to record as employee compensation any options grants with intrinsic financial value when they're awarded. Many companies didn't follow the regulation, which made their profits look greater than they were.
About 200 companies have been targeted by Justice Department and Securities and Exchange Commission investigations, and many have had to restate their finances, erasing billions of dollars in previously reported profits and leading to the ouster of dozens of corporate officers.
San Jose-based Brocade, a dot-com-era high flyer, used its generous options awards as incentives in a fierce battle to recruit new engineering and sales talent, offering bigger compensation packages while keeping options-related compensation charges off the company's books.
The company makes switches and software used to connect corporate servers to their data-storage machines.
Prosecutors alleged Jensen doctored offer letters and other personnel documents in a scheme from 2000 to 2004 to make it appear that prized new workers were hired _ and awarded stock options _ before they actually were.