Wilson Sonsini Paid Client $9.5M to Defray Backdating Costs
Wilson Sonsini Goodrich & Rosati has paid its client, Brocade Communications Systems, $9.5 million in hopes of releasing itself and firm chairman Larry Sonsini from backdating claims.
The payment was revealed in a footnote in a court filing, report the Recorder and the Daily Journal (sub. req.). On Friday, a special litigation committee filed a shareholders derivative suit against 10 former Brocade board members and executives, including ex-CEO Gregory Reyes. It seeks dismissal of an earlier derivative suit that named Sonsini and the law firm as defendants. Both suits seek to recover the costs to the company in connection with a backdating scandal.
The footnote says the special committee has concluded it would be “inappropriate” to pursue claims against the law firm and Larry Sonsini, who sat on Brocade’s board. The footnote cites the $9.5 million payment, the firm’s contention that it was misled about stock-option grants, and its legal work on behalf of the company that resulted in a favorable settlement with the Securities and Exchange Commission.
The footnote said the payment was “in recognition of and in order to defray some of the significant costs Brocade has incurred over the past four years in connection with the various investigations and lawsuits relating to the company’s historical stock option practices.”
