The Backdating 'Scandal' Is Dealt Another Blow

Posted by John Carney, Dec 12, 2007, 5:02pm

The backdating panic of last year appears to have largely deflated. The one big conviction from the much-ballyhooed scandal was Greg Reyes, the former head of Brocade. He was tried and convicted in August on charges of conspiracy and fraud in connection to backdating stock options at his company.

But that conviction now looks doubtful. In today’s New York Times, Andrew Ross Sorkin reveals that one of the prosecutions principal witnesses has said that her testimony was untrue.

The Wall Street Journal, which won a Pulitzer Prize for setting off the backdating panic with its breathless, front-page coverage, has oddly enough not found room for this story anywhere on it’s vast website. Is the Journal’s news team not as enthusiastic about backdating? Or do they not hand out Pulitzer’s for writing about how a scandal fades?

Trial Witness Said to Cast Doubt on Part of Testimony [New York Times]

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Posted by Anonymous, Dec 12, 2007 6:28PM

And in addition to that set-back, consider this posting about the Reyes judge finding the claimed "fraud" had no loss associated with it. http://lawprofessors.typepad.com/whitecollarcrime_blog/2007/12/fraud-without-l.html It is a criminal theory in search of facts, "facts" blugeoned forth in the torture chamber of abusive plea bargaining.

Posted by JustAnotherWhiteCollarCriminal, Dec 12, 2007 7:07PM

Not only did she recant, she wrote a letter to Roger Parloff of Fortune saying that the CFO of the company devised the plan and implicated him, he had been the CFO at another company with options issues too, and he was the star witness against the prosecution! In other words the prosecutors had their guilty party, but he was a cooperating witness. so they framed 2 other people. CFOs always do options plans, not CEOs especially since in this one, the CEO wasn't even a participant! Talk about out of control proseuctors.

Posted by JustAnotherWhiteCollarCriminal, Dec 12, 2007 7:16PM

Typo I meant the CFO was the star witness for the prosecution against the CEO who was convicted. This witness implicated him, and the prosectors claimed he didn't know anything about backdating (which smelled bad all along, this is just impossible). My guess is the CFO was more sophisticated than the young CEO and knew not to sign anything. But that doesn't mean he didn't know anything.

Posted by Anonymous, Dec 13, 2007 12:04AM

This is a good post. Nice follow-up on the story.

Posted by Anonymous, Dec 13, 2007 8:21AM

Check out Prof. Ribstein today on the subject with link to the Parloff story. http://busmovie.typepad.com/ideoblog/2007/12/the-reyes-backd.html We had NatWest just a few days ago, and now this story. When do the prosecutors start doing some perp walks?

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