Big Legal Bill for Exec's Backdating Defense
Major corporations commonly agree to indemnify officers and directors for legal costs, should they be sued or prosecuted as a result of their work. Otherwise, even CEOs often would find it difficult or impossible to pay the cost of a standard defense.
However, the defense price tag can be noteworthy even for a major corporation. In this year’s stock options backdating trial of former Brocade Communications CEO Greg Reyes, for instance, it appears that his defense cost the company at least $10 million in the third quarter of this year, according to the San Jose Mercury News.
SEC filings show the company spent about $38.4 million in legal fees so far this year, which is when Reyes was tried. Brocade won’t say how much it paid for his defense, but the newspaper notes that most of the trial took place during the company’s third quarter, which ended July 28. During that time “Brocade spent $18 million in legal fees, compared with $3 million during the year-before quarter, a $15 million increase.”
It isn’t clear whether insurance will cover all or part of the defense costs.
Details of Reyes’ trial are discussed in an earlier ABAJournal.com post. He was convicted in August, the New York Law Journal notes in an article that further details the prosecution and defense, but is not expected to be sentenced until next month.
