Brocade backdating scandal
“Outside” CFOs are the kind that understands financing, IPOs and working with analysts and outside investors.They are also, presumably, the kind that understands SEC reporting, GAAP and other requirements of a fast growing public company with lots of market exposure.As an aside, here’s an interesting article in Financial Week, written prior to the verdict, about what the jury in the Greg Reyes trial didn’t hear: “Gesturing from the bench with a dismissive wave of his hand, the (Judge Breyer)concluded: “[What] these transcripts…demonstrate to me is how incomplete and inadequate and less than forthcoming people are during these calls…Why isn’t the government then entitled to show how artificial and how structured and how incomplete these discussions are which go out to the market in terms of information….But then it becomes quite a different trial.”That trial, Judge Breyer went on to explain, would become one concerned less with any specific transgressions that might have taken place with the accounting at Brocade under Mr. “[Whether] the board of directors was browbeaten…whether or not in these investor meetings the company was forthcoming…and how information was disseminated to the public and so forth.” And that, the judge seemed to suggest, is not a trial within the court’s scope.A few weeks later, their CEO Greg Reyes was asked by Brocade’s board to resign, after KPMG would not sign off on the company’s financials if he remained CEO, it was learned during the trial.
Former CEO Greg Reyes was convicted last week in the nation’s first criminal trial involving backdated options and is awaiting sentencing, while former vice president of human resources Stephanie Jensen is awaiting trial.“This case confirms the commission’s commitment to pursuing not just those who perpetrate financial fraud, but those corporate gatekeepers who allow it to happen,” SEC enforcement director Linda Chatman Thomsen said in a press release.” KPMG has been Brocade’s auditors for a while, having inherited this account from Arthur Andersen with the 2002 fiscal year. A politician, a thief and a KPMG manager died and went straight to hell. I want to call my country and see how everybody is doing there.” She called and talked for about 5 minutes, and then she asked “Well, devil how much I need to pay for the call????