UPDATE 4-Jury convicts Brocade ex-CEO in options trial

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By Eric Auchard and Duncan Martell

SAN FRANCISCO, Aug 7 (Reuters) - A U.S. jury convicted the former chief executive of Brocade Communications Systems Inc (BRCD.O) on Tuesday on all counts in the government's first criminal trial of options backdating.

Legal experts said the conviction could embolden prosecutors and regulators in their pursuit of similar cases. More than 170 U.S. companies have been touched by scandals over whether options grants were retroactively priced on days when a stock was low, maximizing gains for employees.

Former Brocade CEO Gregory Reyes, 44, was found guilty of 10 counts, including conspiracy to commit securities fraud, mail fraud, falsifying books, records and accounts, and making false statements.

Reyes, who could face decades in jail and millions of dollars in fines, hugged his wife and appeared to be holding back tears after the verdict was announced. His attorney later issued a statement saying he would appeal.

"Greg Reyes is innocent and we are confident he will ultimately be exonerated," Richard Marmaro, Reyes's attorney, said. "At all times, he acted in the best interests of the employees and shareholders of Brocade."

Tim Crudo, the trial's lead prosecutor who is also involved in deciding whether to bring criminal charges over backdated options at Apple Inc. (AAPL.O), smiled after the trial but declined to comment on the verdict to reporters.

Reyes, who was CEO of the San Jose, California-based data-storage network switch maker from 1998 to 2005, had not been accused of directly enriching himself, unlike executives accused at many other companies. That made his conviction on fraud and other charges all the more powerful.

"This is a pretty strong message to other prosecutors considering other cases ... that they can also obtain convictions," said John Coffee, a professor at Columbia Law School. "Prosecutors like to be able to say 'we are not breaking new ground.' And now the ground, such that it is, has been broken."

Peter Henning, a law professor at Wayne State University who specializes in white-collar crime, said prosecutors now may get more cooperation from lower-level executives, letting them build stronger cases against those further up the corporate hierarchy.

"We may see more plea bargains. Defense lawyers are going to notice this," he said.

Henning added that all eyes will now be on computer maker Apple, which has also been under scrutiny for options backdating.

"I suspect people will be looking mostly at Apple, just because of 'you-know-who.' Although I don't think you'll see a criminal case against (Apple chief executive and co-founder) Steve Jobs," he said.

OPTIONS ATTRACTED EMPLOYEES

The jury in the Reyes trial reached its verdict after seven days of deliberations. The trial in San Francisco federal court, presided over by Judge Charles Breyer, began June 18.