Prosecution in Reyes Case: We Lied. Whoops.

Last week the U.S. Court of Appeals for the 9th Circuit overturned the conviction of Greg Reyes, former CEO of the tech company Brocade, in a case involving the backdating of stock options. Wall Street Journal columnist Holman Jenkins highlights the prosecutorial misconduct that led to he 9th Circuit's decision:

In court, the government insisted over and over that Mr. Reyes had misled his own finance department about the use of "lookbacks" to grant employees "in the money" options without having to expense them (a senseless accounting rule at the time). Never mind that this story flew in the face of the publicly known facts or that the government's sole witness, a junior finance department official, later recanted, saying she had been bullied by prosecutors. Hilariously, even as Justice argued in one courtroom that Brocade's finance department had been kept "in the dark" about backdating, the SEC was simultaneously impaling two former heads of Brocade's finance department for aiding, abetting and benefiting from backdating.

In a final indignity, after Mr. Reyes's conviction, the government admitted it knew its central contention was false, thanks to numerous, immunized statements from finance department officials. As Justice official Amber Rosen told the appeals panel in oral argument this past May: "Defendants aren't entitled to a perfect trial….Misstatements happen."

The 9th Circuit saw things differently:

Defense counsel made no knowingly false statements. The prosecutor did. Indeed, on appeal the government does not seriously dispute the falsity of the prosecutor's statements or the duty of the prosecutor to refrain from making such statements.

Business Week's Peter Burrows notes that the Justice Department turned Reyes, who would have faced 21 months in prison and $15 million in fines if his conviction had been upheld, into a scapegoat for a "gray area" practice "that was common in Silicon Valley in the 1990s."

The 9th Circuit's decision is here (PDF).

[via Bill Anderson at LewRockwell.com]