On December 5, 2007, following a 5 1/2 day trial in the U.S. District Court for the Northern District of California, a jury convicted Brocade’s former head of human resources, Stephanie Jensen, of falsifying corporate records and conspiracy. In convicting Jensen, the jury rejected her chief defense: that she did not know she was violating complex accounting laws. Notably, early in the trial, one of Jensen’s subordinates in the human resources department testified that Jensen once told him not to mention Brocade’s backdating practices in corporate emails, presumably because emails leave a permanent record according to the witness.
The government’s decision to prosecute Jensen was somewhat surprising given her relatively low level position within Brocade. On the other hand, prosecutors alleged that Jensen was an integral part of Brocade’s options backdating scheme because she routinely altered the issuance dates on stock options to reflect more favorable prices. Prosecutors originally also filed securities fraud charges against Jensen, but dropped the charges months before the trial began.
Jensen’s conviction is the second arising out of Brocade’s stock options backdating scandal, coming on the heels of the August 7, 2007 conviction of Brocade’s former CEO Greg Reyes for securities fraud (click here to read more about that conviction). The government’s continued success in the backdating area, together with its decision to prosecute Jensen, may signal that a significant number of its pending investigations will result in prosecutions.
