Government Looks for Success Against Former KB Home Executive Following String of Failures in Stock Option Backdating Cases
After the failure of its backdating case against Gregory Reyes, former Chief Executive Officer of Brocade Communications Systems, prosecutors with the U.S. Attorney's Office for the Central District of California are taking a new tack in its backdating case against former KB Home CEO Bruce Karatz, according to the National Law Journal. Karatz is alleged to have received millions in undisclosed income as a result of backdating stock options, and made $232 million in his last three years as CEO alone. The prosecution has decided to focus on Karatz's personal gain from the alleged scheme, and circumvent the defense--effective in the Brocade Communications Systems case--that backdating is not criminal where the corporation is aware of it, or where a defendant relies on the advice of attorneys or accountants. Defendants have also successfully argued that backdating is a legal and legitimate practice, and that many companies restate their income as a result of such conduct.
The U.S. Court of Appeals for the Ninth Circuit reversed Reyes' conviction in August based on the government's alleged prosecutorial misconduct in intimidating and influencing witnesses. The government's failure in the Reyes case came along with its defeat in 2008 in a backdating case against Kent Roberts, the former General Counsel of McAfee, Inc., a security software firm, and the dismissal of its case against two former executives of Broadcom Corp.
Of course the Government has to take the prosecution in a new direction. According to this site (http://www.usgovernmentlied.com) they weren't honest the first time around.
It is hard to think that if you lie about your case that there is a case to begin with.