Legal Issues
In 2005, Gregory Reyes resigned as CEO after being indicted for securities fraud relating to backdating stock option grants. After spending about a year investigating these allegations, the Department of Justice (DoJ), through the US Attorney’s Office, the SEC, and the FBI filed criminal and civil charges against Reyes. In roughly the same time frame, the DoJ, SEC, and FBI also began investigating over 100 other companies for similar activities. Greg Reyes and Stephanie Jensen, the former vice president of HR, were charged with 12 counts of fraud. Two counts were dismissed, and on August 7, 2007, Reyes was convicted on the remaining 10 counts. On January 16, 2008, he was sentenced to 21 months in prison and ordered to pay a $15 million dollar fine. Stephanie Jensen, Brocade's former vice president of human resources, was convicted in a separate trial. On March 19, 2008, she was sentenced to four months in prison and ordered to pay a $1.25 million fine. The convictions of both Reyes and Jensen were appealed. On August 18, 2009 the United States Court of Appeals for the Ninth Circuit overturned Gregory Reyes' convictions and sent the case back to the lower courts for retrial, where he was again convicted, and sentenced to 18 months in prison and a $10 million fine. Reyes was incarcerated at the Taft Correctional Institution in Taft, California, with an anticipated release date of December 29, 2011. As of August 2011, a second appeal remains pending.
Brocade announced on August 6, 2012, that a San Jose federal court jury returned its verdict in the case of Brocade v. A10 Networks, and found A10 responsible for broad-based intellectual property infringement and unfair competition, awarding approximately $112 million to Brocade The trial lasted three weeks. The jury unanimously awarded punitive damages against A10 Networks and also personally against its CEO Lee Chen, strongly condemning Chen and A10's unfair competition. The jury also returned an unambiguous verdict for patent and copyright infringement and trade secret misappropriation covering A10's entire AX Series load balancing server products.
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