It doesn’t quite have the ring of the Seattle Seven, but the newly minted name “Silent 11” got plenty of play Friday in Judge Charles Breyer’s federal courtroom.
They’re the group of former Brocade Communications employees who were interviewed by the SEC and federal prosecutors in the runup to the first indictments to grow from the massive stock option backdating mess. Now, as part of the SEC’s corresponding civil case, those indicted executives — former Brocade CEO Gregory Reyes and the company’s ex-HR manager, Stephanie Jensen — want to depose the 11, whose government interviews were conducted under temporary immunity agreements.
The problem is that since the immunity agreements (.pdf) were only good for the day of testimony, the witnesses have invoked the Fifth. That has Reyes’s lawyer, Richard Marmaro of Skadden, Arps, furious — he says the government should extend the immunity so he can get some answers, or else Breyer should compel them to testify.
But prosecutors have balked, and at Friday’s hearing, they showed no inclination to give in.
That left the judge in a bit of a quandary — he wants the move the case forward, but said he didn’t see any precedent for ordering immunity in the situation.
Indeed, the judge said, while he enjoyed reading Marmaro’s brief on the issue — a vigorously argued piece of writing riddled with maritime metaphors — it had a significant deficiency.
“There wasn’t, like, a case there,” Breyer said.
Marmaro conceded that point, but said he feels the SEC and federal prosecutors are teaming up to withhold information from the defendants by blocking testimony of people who have little chance of being charged.
“There is no way on God’s green earth that the Silent 11 are in any jeopardy,” he said. “What’s happening here, and the court knows it and everyone in the courtroom knows it, is the prosecutors don’t want their criminal witnesses under oath in the civil case,” Marmaro added, since prosecutors are afraid of inconsistencies.
But given the subsequent argument offered by an SEC lawyer, Marmaro would be well advised to reconsider his assumptions of what everyone in the courtroom knows. After he was done speaking, SEC attorney John Yun got up and told Breyer that criminal immunity was the business of the Justice Department, and the SEC really didn’t have much to do with it.
Breyer didn’t like that answer much (he called it “timid”), but it was Jensen’s attorney, Jan Little, who popped out of her chair in pique to point out something was pretty clear in the SEC’s own filings: FBI agents and federal prosecutors were present at the witness interviews, and were part of the immunity agreement. “It’s a little bit ridiculous not to talk about that,” she said. Walter Brown, who represents the 11, then got up and confirmed — to the apparent dismay of a flustered Yun — that yes, the agreements extended to criminal immunity.
That brought Brown back to his original point: Without ongoing immunity, his clients are in limbo. It would be unwise to offer sworn testimony in depositions that could lead to criminal charges without immunity, yet without such an agreement, the SEC couldn’t use them as witnesses, either. Or, in maritime speak, “They’re not in this boat that’s going anywhere. They’re just floating,” Brown said. But with immunity, “they could probably come ashore.”
After all that, Breyer seemed inclined to speed up the deadline for a summary judgment motion, in which the SEC would have to disclose much of its case. That would produce more clarity on how it will treat the witnesses, and possibly on whether they’ll get immunity or be keelhauled with the problematic inference wrongdoing that invocation of the Fifth can create in a civil case.
— Justin Scheck
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