WSJ article re possible criminal charges

News Brief
July 18, 2006

By: Cydney Posner

While SEC Chairman Cox is warning of imminent civil charges in the option backdating scandal (haven't we already seen some of those?), the office of the U.S. Attorney for the Northern District of California has warned the former chief executive of Brocade Communications that he may face criminal charges related to stock option timing practices, according to the article from the WSJ. The article observes that, if filed, these would be the first criminal charges arising out of the scandal. The article cites as problems options that were issued to new employees on their offer acceptance dates, rather than on the dates they actually commenced employment and options issued to employees who were put on part-time status prior to starting full-time employment. Both cases apparently involved incorrect accounting treatment.