Reyes' Conviction Reversed: Pocedural Misconduct Warrants New Trial

In January, this blog reported the $15 million fine and sentencing of Gregory Reyes (“Reyes”), former CEO of Brockade Communication Systems, Inc., for backdating options.  On August 18, the Ninth Circuit Court of Appeals reversed Reyes’ conviction due to prosecutorial misconduct and remanded for a new trial.

During the trial, Reyes argued that he lacked the necessary criminal intent to knowingly deceive because he disclosed the backdating to the Finance Department and the corporation disclosed the backdated options as expenses on the financials.  However, during closing arguments, the prosecutor in the trial told the jury that the Finance Department did not know that the backdating was occurring.  Reyes moved for a new trial on the grounds of prosecutorial misconduct, arguing that the prosecutor prejudiced the jury by offering this statement without supporting evidence.  The trial court denied the motion, reasoning that the prosecutor’s verbal slip was harmless error. 

The Court of Appeals disagreed, and found that Reyes’ defense relied upon convincing the jury that the Finance Department was aware of the backdating and that Reyes was merely deferring to its judgment.  In coming to its conclusion, the Court pointed to the seven days it took the jury to deliberate, the prejudicial effect of making false statements during closing arguments, and the influence prosecutors have over the public.  The Court found the prosecutor’s error particularly blatant because one of the Finance Department’s employees was a witness for the prosecution who testified that she knew of the backdating scheme.  This testimony was further corroborated by other Finance Department employee statements gained through an FBI investigation.

Reyes also argued that the misconduct was sufficient grounds to dismiss the indictment.  The Court disagreed on this point, only stating that the prosecutor’s conduct was not so egregious as to rise to the level of dismissing the indictment.  However, the procedural error was sufficient to remand to the district court for a new trial.

The primary materials for this post are available on the DU Corporate Governance Website.

Comments

[A question from a non-lawyer]

How come it is called "perjury" if a defendant lies to a jury and it is called "misconduct" if a prosecutor does? The penalties for perjury and misconduct are very different.