The lead story in The Recorder on Wednesday morning — up on Cal Law right now — is the surprise prosecutors unveiled on Tuesday in the trial of Gregory Reyes. Lawyers for the ex-CEO of Brocade Communications have agreed that backdating is a bad thing, but that Reyes (neither a lawyer nor accountant, he) hadn't known that the practice was illegal, and would've expected his underlings to square options awards with relevant securities regulations.
In court on Tuesday, the second day of Reyes' trial, attorney Richard Marmaro told Judge Charles Breyer, while the jury was out, that he'd just learned that an upcoming prosecution witness was going to drop a bombshell. A former Brocade worker would testify that Reyes had said backdating "isn't illegal if you don't get caught."
Well, that's not going to help Marmaro's defense at all. He argues that prosecutors should've disclosed this months ago (they admit the witness told them this on April 30). The prosecutors reply that they were legally bound to turn over the FBI paperwork, but that their witness didn't mention this little thing when she was talking to the FBI. She told prosecutors later, and only verbally.
First thing Wednesday morning, Breyer will have to decide whether to allow the testimony. Whichever way he goes, someone's case is taking a dramatic turn for the not-so-good. It seems like a tough question, so we invite those of you with a criminal defense background to read the story and weigh in here — What should Breyer do?
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— Brian McDonough