Judge is skeptical in stock option case

A federal judge questioned whether U.S. prosecutors have enough evidence to convict Gregory Reyes, Brocade Communications Systems Inc.’s former chief executive, of illegally backdating stock options.

At a hearing Friday in San Francisco on whether to dismiss a criminal case against Reyes, U.S. District Judge Charles Breyer repeatedly asked government lawyers to show evidence that Reyes, 44, understood accounting rules about stock option grants or acted recklessly in handling them.

Reyes faces 10 counts including conspiracy, fraud and making false regulatory filings. He’s the first corporate executive to face trial for backdating, and a dismissal may undermine government efforts to prosecute others over the practice.

“This is a case about false accounting. You have to show that he knew what he had to disclose,” Breyer said at the hearing. He ordered government lawyers to file a report by Monday outlining all the evidence they want him to consider.