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Two Plead Not Guilty in Stock Option Case

From the Associated Press

The first two executives ensnared in the nation’s stock option scandal pleaded not guilty Wednesday in federal court to making false statements to securities regulators, falsifying records and other charges.

Gregory Reyes, former chief executive of Brocade Communications Systems Inc. and Stephanie Jensen, the company’s former vice president of human resources, were charged with one count each of securities fraud in a criminal complaint July 20 and indicted on additional charges Aug. 10.

Authorities allege that the backdating of stock options was partly responsible for the restatement of the company’s financial results for fiscal years 1999 to 2004, shaving 20 cents off previously reported earnings-per-share figures.

Reyes is free on $2-million bail and Jensen on $500,000 bail. They face as many as 20 years in prison if convicted. The two have contended that any backdating was meant to attract employees to the San Jose-based maker of data storage devices, not to skew financial results.

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No trial date has been set.

Dozens of U.S. companies have disclosed that their stock option practices are being investigated by the Justice Department or the Securities and Exchange Commission.

Also Wednesday, video game maker THQ Inc. disclosed in a regulatory filing that its board was sued over the dating of stock option grants to executives.

A shareholder filed the lawsuit Friday in Los Angeles County Superior Court, Agoura Hills-based THQ said in a filing with the SEC. Directors and executives are accused of breach of their fiduciary duties in the action, which seeks restitution to the company of proceeds from backdated grants.

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Shares of THQ fell 63 cents to $26.18.

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Bloomberg News was used in compiling this report.


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