From the Editor

By Martin Lasden
     
In the opening scene of Woody Allen's 2005 movie Match Point, we see a tennis ball moving in slow motion across the net, while the film's protagonist, a former tennis pro named Chris Wilton, reflects on the advantages of luck over virtue. "People are afraid to face how great a part of life is dependent on luck," says Wilton, who in the movie gets away with a double murder. "It's scary to think so much is out of one's control. There are moments in a match when the ball hits the top of the net and for a spilt second it can either go forward or fall back. With a little luck, it goes forward and you win. Or maybe it doesn't and you lose."
      Sometimes, that's the way it works in a real criminal trial. Consider the federal case against Greg Reyes. Last summer, the former CEO of Brocade Communications Systems in San Jose became the first criminal defendant in the nation to go to trial for backdating stock options?a relatively minor offense, it would seem, compared to the alleged transgressions of people like Ivan Boesky or Kenneth Lay. In fact, the options Reyes was accused of backdating weren't even his own. But juries can be unpredictable, as Craig Anderson shows in this month's cover story ("Guilty!" page 18).
      Anderson, who covers Silicon Valley for our sister publication the Daily Journal, sat in on most of Reyes's trial. And almost until the very end, he admits, he felt Reyes would be either acquitted or, at most, found guilty of one or two counts from the indictment. Instead, the jury convicted him of all ten counts, which carries a maximum prison sentence of 20 years.
      A critical turning point came when prosecutors called Craig Martin to the witness stand. A partner at Morrison & Foerster, Martin had been hired by Brocade's board of directors to conduct an internal investigation. (Had the company unambiguously refused to waive its attorney-client privilege, the jury never would have heard Martin contradict Reyes's defense.) According to Martin, instead of blaming his well-documented actions on the bad advice of experts, Reyes denied that he ever backdated anyone's options.
      In the end, however, an even more critical variable than Martin's testimony may have been how the jury viewed the role of a CEO, a factor Anderson says he didn't fully appreciate during the trial. "They didn't want to hear about Reyes not understanding the law or that he relied on the advice of others," he says. "As far as they were concerned, Reyes was making the big bucks and therefore he should have been responsible.
      "Of course," Anderson adds, "if there had been an acquittal or a hung jury, this whole backdating saga would be looking a lot different. People under investigation who had cut deals would be regretting it. And those who hadn't cut deals would be inclined to fight harder. Now, however, it's the federal prosecutors and the SEC who have the whip hand. And that probably means more backdating cases down the road."
      Match point, the feds? Stay tuned.
     

     

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