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Court is in recess today.

No witness has yet to state that Reyes backdated.. or that he personally chose a date for the stock option.. or even that he has/directed anyone else to do so!

Maybe because.. HE DIDNT!!!

Upon questioning Richard Deranleau, there is much reference to June Weaver and how she chose dates for granting stock options..

Hmmmm..

There are discussions of Reyes certifying 10K forms.. and Reeves implying Reyes did not “review” the documents when certifying he did. But what REALLY constitutes reviewing?

Prosecution speaks of accounting standard change from APB 25 & SFAS 123..

Testimony proves Greg did not attend meeting regarding the iQuantic Review’

Witness  Richard Deranleau states to Def Atty Neal that Reyes has NEVER asked him to do anything that was wrong or considered wrong.

Witness Brocade CFO Richard Deranleau states that Reyes NEVER directed him to do anything in regards to the “looking back” process of stock options.

Atty Neal provides that “APB 25 states that the measurement date is not necessarily the same as the grant date.”

Defense Atty Neal discuses ISOs (Incentive Stock Options) which include favorable tax attributes  and  must be issued at fair market value.

He THEN discuses NSOs (Nonqualifying Stock Options) which does not qualify favorable tax attributes.

According to Derenema, Under Brocade’s plan, NSOs COULD be granted in the money!

Purpose of the Brocade Stock Option Plan:

* Attract/ retain best available personnel for positions
* Provide additional incentive to employees, consultants, and directors
* Promote success of corporation

And this is bad becauuuuuseee???

Brocade CFO Richard Deranleau  answers that he never explained the accounting rules to Greg regarding stock options.

How is Reyes expected to know, if his team is not informing him???

Brocade’s 10 K form provides there were in fact FAS 123 disclosure..

When asked (by Atty Neal) in Brocade who had the ultimate responsibility of having knowledge of the stock options/granting reporting, Richard Deranleau answered.. “My Department.. as CFO..”

Richard Deranleau refers to APB 25 as “a very complex piece of literature.”

Wow. If a CFO (with accounting expertise)is describing it as that, imagine what the rest of us would think of it. I’m getting a headache just thinking about it.

“APB 25 has been criticized for producing anomalous results and for providing little general guidance on how to account for new forms of stock based employee compensation plans”

This should no longer be an element in the case especially considering the endless criticism behind it. What is the logic behind criticizing Reyes in regards to a standard that is highly criticized itself??

CFO was responsible for accounting of stock option accounting.

APB 25 working knowledge. Going over APB 25 and reference to Grant Date language.

States the measurement date is not the same as the grant date.
Does APB 25 FMV. So if the accounting guys can’t figure out APB 25 how could the CEO understand it? He relies on his Finance Department.

FAS 123 -admitted. Accounting for Stock Based Compensation.
FASB- GAAP Board.

Judge encourages Defense to move it along in their examination…then says if we are staying to the cross then keep going.

Non-cash expense-a stock option would qualify as one. So no change to the Profit and Loss statement.

Stock Option Expense under FAS 123-
HUGE!!!! Brocade did account for Stock Option Expenses under FAS 123.

I know the terminology seems obscure….but hang in there.

So the claim that Stock Options were not accounted for as an expenses is incorrect. Under FAS 123 they were accounted for under notes on a ProForma basis. Doesn’t seem like anything was hidden as the Govt portends…

What’s interesting no objections by the Govt on the cross….I guess the truth can’t be interrupted.

Seems the total Stock Option Expense was $1.4 Billion… yes that is a big number. Seems no one was hiding anything.

On the 10K restatements the allocation under FAS 123 was lowered so the company did a GREAT JOB in accounting the stock option expense.

APB 25-is not as aggressive in accounting for stock option expenses and doesn’t do as good a job in guiding a potential investor.

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The Prosecution has gone to far this time. They misled the jury that you could not issue in-the-money options by highlighting a different part of the 10k when in reality you could and Brocade did.

2nd- the Govt made reference to an attachment that did not exist with a meeting notification and tried to establish Mr. Reyes understood the implications of APB 25 vs. FAS 123R as evidenced by an attachment that wasn’t attached and also mis-marked.

WOW…lets stick to the facts…and REAL EVIDENCE. Is this another mistake like in the first proceeding?…I guess I am still a newbie to the process.

Comparison of APB 25 vs SFAS 123….APB 25 asked for comp charge for in-the money options. Witness is giving his take on the HR New Hire Stock processing doc. Stock pricing was different than the Accounting understood. Process was Comp comm would meet then decide price and use the stock from that date.

Lookback -surprised current CFO Brocade…not sure if illegal.
Witness-it went against his understanding of how the HR Department at Brocade should handle choosing a stock price.

Reviewing KPMG comfort letter. CFO signed it in 2003 he took it very serious.