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Brocade Communications Systems Inc. (Nasdaq: BRCD) executives dont think theyre getting their moneys worth out of former CEO Greg Reyes in his new role as consultant.
During its earnings call Thursday night, CFO Tony Canova indicated Brocade may try to avoid paying Reyes the $1.7 million it owes him under terms of an agreement he signed when stepping down in January (see Ex-CEOs Cash In). Brocade agreed to retain Reyes as a consultant for two years and pay him the same salary and bonuses -- a total of $910,000 per year -- he would have earned as CEO.
With the U.S. Department of Justice and Securities and Exchange Commission (SEC) investigating its stock option grant practices under Reyess watches, Brocade execs say Reyes isnt helping them (see Brocade Being Investigated).
While the consulting agreement remains in place, the company can no longer demonstrate that services are being received for the payments being made, Canova told analysts on a Web call. Canova said Brocade and the board are evaluating what role, if any, Reyes will play going forward and how to proceed with respect to the resolution of his consulting agreement.
That sounds as if Brocade is trying to get out of the deal, whether by negotiating a new agreement with Reyes or taking him to court. Brocade took an accounting charge of $1.7 million, the amount it still owes Reyes.
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