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No Charges Stick to Former McAfee General Counsel in DOJ Case
The Recorder
October 06, 2008
The only lawyer to face criminal charges over misdated stock options is a free man. And according to one juror, it's because the government couldn't prove intent.
After a 2 1/2-week trial -- and three days of deliberations -- the jury acquitted former McAfee general counsel Kent Roberts on mail fraud charges Friday afternoon. Jurors couldn't agree on a false-books-and-records count, so Judge Marilyn Hall Patel declared a mistrial on that charge.
"I would strongly recommend against pursuing this further," Patel told Assistant U.S. Attorney Laurel Beeler. "This was not a case where any money was lost as a result of this."
A spokesman for the U.S. Attorney's Office declined to comment. Roberts still faces SEC charges related to stock option backdating at McAfee.
Federal prosecutors accused Roberts of illegally changing the date on his stock option grant in 2000 to increase its value. However, the lawyer never cashed those shares.
Most members of the seven-woman, five-man jury declined to comment as they made their way to the elevator. "Too soon," one woman said. "Too emotional."
But William West, a retired contract negotiator for the Port of Oakland -- and a 1981 graduate of Golden Gate University School of Law -- said deliberations focused on what Roberts knew in 2000, when the option grant was changed. While Roberts clearly realized in later years that his stock option grant was tainted, West said, the government couldn't prove Roberts intended to commit a crime at the time of the option grant itself.
"Nowhere in the e-mail trail was there an indication he had initiated what the government called 'a scheme to defraud' the company, or to get the option repriced," West said. "Certainly he went along with it, but there was no evidence he initiated what ultimately resulted in a repricing of his options. That was a big issue for me and the jury."
The Justice Department originally brought a broader indictment against Roberts, alleging he changed one of the former CEO's option grants as well. But in the weeks leading up to trial, prosecutors narrowed the charges -- and, presumably, the field of evidence -- to focus on the one transaction from 2000.
Cooley Godward Kronish partner Stephen Neal said his defense team was "very pleased with the verdict and very grateful to the jury." He also complimented Beeler for handling the trial fairly.
The government also tried to win a mail fraud conviction on the theory that Roberts deprived McAfee of its right to his honest services, by putting his interests ahead of the company's. Indeed, all the jurors agreed that Roberts broke his fiduciary duty to the company, West said.
But the jury split evenly on whether Roberts intended to do it. Those in the government's camp argued that Roberts should have known better, West said, because he was the company's top lawyer.
And even though West doubted the government's proof, he said he had been willing to explore the honest services theory. By Friday, though, some of those jurors aligned against the government had hardened their positions. Because Roberts had just become general counsel in 2000 -- and was not a securities lawyer by training -- West and other jurors gave Roberts "the benefit of the doubt" that he did not know the rules at the time.
The Roberts prosecution is the third in the Northern District of California to grow out of the stock option backdating scandal that rocked Silicon Valley in 2006. Jurors convicted Brocade executives Gregory Reyes and Stephanie Jensen in separate trials last year.
The Roberts trial started with a discovery gaffe on the part of Howrey, the law firm McAfee hired to do its internal investigation. The company produced a set of e-mails from November 2000 about Roberts' grant the night before opening statements, even though it had been under subpoena for two years. Howrey pinned the mistake on contract lawyers hired to review millions of documents.
The government presented three witnesses -- including Wilson Sonsini Goodrich & Rosati partner Boris Feldman -- to testify about events in May 2006, when Roberts came forward and acknowledged a mistake with his option. In her closing, Beeler characterized it as a confession.
But West said he didn't see it that way. Rather, it was the mark of someone trying to right a mistake.
"I think he was an honorable man, but got caught up in something that mushroomed beyond what he expected," West said.
As for the lawyers' performance, West, 65, characterized it as youth and eagerness on the part of the prosecutors versus age and experience for the defense.
"Stephen Neal, he was smooth as butter," West said. "I know he didn't come cheap."
