The Brocade trial gets interesting

I have earlier remarked here and here that Judge Charles Breyer did not seem to be giving the defense arguments in the Brocade backdating case the consideration they deserved. So in fairness to the judge I should report that based on this WSJ Law Blog report he seems to be giving serious consideration to the defense’s motion to dismiss following the prosecution’s case.

At one point, Breyer reportedly “bristled” when a prosecutor invoked Brocade’s 2002 10k, which Reyes signed — and which stated, erroneously, that in-the-money options were properly expensed.

“A CEO can be prosecuted, criminally prosecuted, if there’s a misstatement in a 10k that he didn’t know was a misstatement?” the judge asked. If so, he added, “your cases are going to be very short. From now on, you’re going to take a 10k, you’re going to talk to a handwriting analyst, and you’re going to ask, ‘Is this the CEO’s signature?’

Note that, if it is the case that Reyes can be prosecuted without proof that he knew the options were improperly reported, Steve Jobs better start suiting up (or whatever his equivalent is) for trial. See, e.g. 

On the other hand, if the Brocade case goes down, government criminal prosecution of backdating is in deep doodoo.  We will then be left with civil cases focusing on bad disclosure -- precisely where I have always thought we should be.

Of course, the government might start looking into suits based on improper executive certification of controls under SOX.