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Former McAfee GC's Fate in Jury's Hands
The Recorder
October 01, 2008
The stock option backdating case against former McAfee general counsel Kent Roberts went to the jury Tuesday after the defense rested without calling any witnesses.
Instead, Cooley Godward Kronish partner Stephen Neal simply read aloud a stipulation to inform the jury about McAfee's late production of relevant e-mails at the beginning of trial. It was the first time jurors heard details of the gaffe, and Neal referenced it in his closing argument, saying at one point that the jury was Roberts' last guardian against "a system that hasn't worked the way it was supposed to work."
Meanwhile, Assistant U.S. Attorney Laurel Beeler hammered the view that by virtue of his status as general counsel, Roberts knew the rules at the company. And regardless of what former controller Terry Davis might have told him, Beeler said Roberts knowingly broke those rules when he changed his grant date without board approval.
"Saying someone said it was OK doesn't make it true," the prosecutor said. "It makes no sense. His story makes no sense."
A crush of spectators showed up in Judge Marilyn Hall Patel's court Tuesday morning, with law students nestled next to a large contingent from the U.S. Attorney's office. Before the jury entered, Patel denied Roberts' Rule 29 motion to dismiss.
"What we have are disputes of fact," she said. "A lot of clouds have been cast upon, sand thrown, dust stirred up about the government's evidence."
Yet prosecutors put in enough material about Roberts' intent to defeat the defense motion and let the jury sort it out, Patel ruled.
That cleared the way for Beeler's closing. She walked the jury through the piles of documents in an attempt to show that Roberts was meant to receive a grant priced as of February 2000. Roberts knew it was wrong for the grant date to have been changed to April, when the price was lower, she said, as only the board was authorized to change grants of that size.
In addition, Roberts himself had drafted a list of potential punitive actions the company could take against him, Beeler said. The former general counsel presented that list to board members in 2006, when he acknowledged the date change. That shows he knew what he did was wrong, Beeler said.
But Neal attempted to turn Roberts' admissions from a weakness into a strength. The lawyer shouldn't be guilty of a crime because he had the character to step forward and admit a mistake, Neal said.
And where Beeler highlighted the fact that Roberts headed an unrelated internal investigation in 2002 that led to Davis' firing -- and Roberts didn't then come forward to disclose his own option -- Neal cast that as evidence that Roberts didn't think he did anything wrong.
If Roberts was truly conniving with Davis, he wouldn't risk exposing his deeds, Neal said.
"Why in the world would he fire the critical player in the scheme? It makes no sense," Neal said.
Most of Neal's argument focused on evidence that Davis had the authority to change Roberts' grant. If that's the case, no crime was committed, he said.
The defense lawyer also highlighted the fact that the government never called Davis to the stand, nor a host of other people who were at the company in 2000 and had knowledge of options practices there. In addition, Neal trained significant fire at McAfee's late production of e-mail messages that the defense lawyer said undercut prosecutors' contention that Roberts carried out his actions in secret.
Neal used the discovery gaffe to raise questions about another document: a list of stock option grants that had been referenced in company minutes. That list, created in the month Davis altered Roberts' grant, might show that the board actually signed off on the change after all.
But since the company never produced the list, Neal said, the government can't prove Roberts' grant was unauthorized.
"It's not [the government's] fault they don't have it," Neal said of the list, "but they don't have it."
As he finished, Neal put up two posters listing the prosecution's shortcomings, which he urged the jury to keep in mind during Beeler's rebuttal. Beeler's co-counsel got up to remove them before she began, but she waved him off.
In a somewhat scattered rebuttal, Beeler didn't address Neal's arguments about the late e-mails, instead focusing on McAfee's custom for the board -- not Davis -- to approve large option grants.
As for Neal's speculation that the board could have authorized Roberts' grant -- which could have been reflected in the missing list -- Beeler gave an alternate theory.
"One very good reason he knew -- and I want to get my notes here to get it accurate -- that the board of directors didn't make any changes in 2000," Beeler said, is that "in 2006 Kent Roberts gave not only an apology, but a confession about what happened."
The jury is scheduled to begin deliberations Wendesday.
