Cases

In Re Brocade Communication Systems, Inc. Derivative Litigation

BROCADE -- Johnson Bottini LLP is Co-Lead Counsel in the shareholder derivative case pending against Brocade Communications Systems, Inc. (NASDAQ: BRCD). The case is entitled In re Brocade Communications Systems, Inc. Derivative Litigation, Case No. 1-05-cv-041683. Click here to view the current complaint. The case challenges the illegal ‹backdating‹ of stock options that was orchestrated by the Company’s executives and directors from 1999 to 2004. As a result of this wrongdoing, Brocade has suffered well over $200 million in damages and Brocade’s shareholders have suffered well over $10 billion in the loss of market capitalization. Brocade′s insiders, meanwhile, were enriched by the criminal conduct. Brocade′s own corporate counsel has publicly admitted that the legal fees that the Company has advanced to convicted felons Gregory Reyes (Brocade′s former CEO) and Stephanie Jensen (Brocade′s former V.P. of Human Resources) exceeds $64 million. See Brocade’s January 9, 2008 letter on the subject.

On February 14, 2008, Gregory Reyes was ordered to pay a $15 million fine as part of his sentencing. Click here to See the Order. He had previously been convicted on August 7, 2007 of securities fraud, conspiracy, multiple counts of filing false filings with the United States Securities and Exchange Commission, falsifying Brocade’s books and records, and making false statements to an accountant. Click here to see the jury’s verdict.

Stephanie Jensen was convicted of two felonies on December 5, 2007. Click here to see the jury’s verdict.

Brocade also paid $7 million on August 31, 2007 to settle the SEC case. Brocade has also incurred millions and millions of additional dollars in legal fees and expenses as a result of the audit committee’s retention of Morrison & Foerster and PriceWaterhouseCoopers to conduct the internal investigation (those costs were previously disclosed to be more than $3.7 million). The company also obviously paid millions and millions of dollars to Wilson Sonsini, and in addition, is now paying the legal bills of Cooley Godward Kronish LLP.

Moreover, Brocade was forced to restate four years’ earnings as a result of the improper accounting treatment of its stock options. On January 24, 2005, Brocade announced it would have to reduce net income from 2000-2004 by $304 million. The company’s market capitalization fell by $9.1 billion.

Johnson Bottini LLP is vigorously litigating claims against the responsible individuals in the Superior Court for the State of California, County of Santa Clara. The case is entitled In re Brocade Communications Systems, Inc. Derivative Litigation, Case No. 1-05-cv-041683. You can review all the pleadings in the case by going to www.scefiling.org. This is the website of the Santa Clara Superior Court. On the main page of the website, click on the Cases tab in the upper right-hand corner. A new page will come up which have a box to search under the case name. In that box, type in Brocade and the Brocade case will be listed. Clicking on that link will bring you to a page from which you can view all the pleadings in the case.