Brocade Communications Systems has reached an agreement to pay $160 million to settle a class-action lawsuit involving stock options backdating.
The suit relates to Brocade's restatement of financial results in 2005 after disclosures of backdating emerged. The company widened its 2004 loss to $32 million from $2 million because of the misreporting of stock-based compensation, and later added another $71 million in expenses because of improper accounting for stock options. The suit was originally filed in the U.S. District Court for the Northern District of California against the technology company and some of its former directors and officers.
Last year, Brocade's former CEO, Gregory Reyes, was convicted of 10 counts of securities fraud (see Ex-Brocade CEO Convicted). In January he was sentenced to 21 months in jail and fined $15 million. Brocade's former vice president of human resources Stephanie Jensen was sentenced to four months in jail and a $1.25 million fine.
Based on the preliminary settlement in the class-action suit, Brocade recorded an estimated expense of $160 million on a pre-tax basis. "Brocade believes that this settlement is in the best interest of its shareholders and the company as it significantly reduces the uncertainty associated with this ongoing litigation," said a statement released by the company.
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