Sunday, December 9, 2007

An Interesting Twist in the Reyes Case

The prosecution of former Brocade Communications CEO Gregory Reyes has taken a new turn with the defense filing a motion for a new trial (available below) based on newly discovered evidence, specifically a witness who may not have been entirely truthful in her testimony.  Reyes was the first defendant convicted for fraud based on options backdating, and the company's former human resources manager, Stephanie Jensen, was just convicted on conspiracy and false statement charges. 

In preparation for Jensen's trial, the witness, who worked in Brocade's finance department, had been listed as a prosecution witness.  Right before a pretrial interview with prosecutors, her lawyer from Wilson Sonsini informed the prosecutors that she would assert her Fifth Amendment self-incrimination privilege, and the law firm withdrew from her representation.  The witness had been important to the government's case, with the brief noting that her testimony was cited more than twenty times in the prosecution's closing arguments.  Even more, the defense points out that the "Court, in its order denying the Rule 29 and Rule 33 motions, emphasized the importance of the fact that Ms. Moore did not know about the retroactive pricing of options, and articulated its belief that “the human resources department did not pass along information about the scheme to people in the finance department like Elizabeth Moore." 

In support of its motion, the defense filed affidavits from three individuals who assert that the witness believes her testimony was misconstrued by the prosecutors, and that she was not ignorant about the backdating.  It's not clear whether her testimony at Reyes' trial was diametrically opposed to what she is now stating, so she may not have committed perjury.  But the withdrawal of her counsel and assertion of the Fifth Amendment certainly give the defense fodder to seek a new trial. 

The U.S. Attorney's Office disclosed her assertion of the self-incrimination privilege to Reyes and Jensen as soon as they learned of it, sending an e-mail that stated:

Please be informed that we have been notified by George Niespolo, counsel to Elizabeth Moore, that Ms. Moore will assert her Fifth Amendment privilege if called to testify at the Jensen trial. Mr. Niespolo did not share with us the grounds for that assertion, and he declined to tell us whether he considered the information Brady material as to either Mr. Reyes or Ms. Jensen.  We asked Mr. Niespolo for further details, which he declined to provide except to add that the information was somehow related to her prior testimony.

A government witness who testifies in one trial and then decides to assert the Fifth Amendment in a second trial on the same transactions is certainly suspicious.  Whether Moore is truly a "key" witness remains to be seen, because the conviction of Jensen may provide a basis for prosecutors to argue that her testimony was not so important to the Reyes conviction that different, or even contrary, testimony from her would make a material difference. 

Reyes has not been sentenced yet, and the district court will need to straighten this out before getting to that point, if in fact the cases even reaches sentencing.  While "newly discovered evidence" claims can be brought on just about any ground, this one might gain some traction.  (ph)

Download us_v_reyes_new_trial_motion_dec_3_2007.pdf

Prosecutions, Securities | Permalink

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