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A former Cisco Systems Inc. vice president will have to pay most of the $27 million in restitution ordered after he pleaded guilty to stealing from his former employer, a divided 9th U.S. Circuit Court of Appeals has ruled. U.S. v. Gordon, No. 05 C.D.O.S. 21 The panel rejected arguments that U.S. District Judge Jeremy Fogel was out of line when he ordered Robert Gordon, a Stanford Law School graduate and once a promising Silicon Valley executive, to pay back embezzled money and cover investigation costs. Gordon was convicted in 2002 of wire fraud and insider trading in connection with the embezzlement. He was sentenced to 66 months in prison. Gordon has already paid back $18.5 million and is scheduled to be released from prison in February 2008. Gordon’s conviction stemmed from a couple of schemes. In one, he used his position to transfer Cisco-owned stock and other funds to a fraudulent account he named “Cisco Systems Inc., Bahamas.” He sold the embezzled shares and, with the proceeds, made stock trades using insider information. He also fraudulently persuaded Cisco Systems to provide $15 million to a start-up called Spanlink. Gordon obtained a $5 million return on that investment, which he kept for himself. Gordon agreed not to challenge his conviction, but appealed the restitution order, arguing that Fogel had misapplied a federal statute by calculating an average price for some of the stock instead of using the value on the day Gordon took it. The three-judge panel mostly sided with Fogel and said that it was Congress’ intent that the “restitution process be expedient and reasonable, with courts resolving uncertainties with a view toward achieving fairness to the victim,” according to the opinion written by 9th Circuit Judge Richard Clifton. He was joined by Judge Richard Paez; Judge Ferdinand Fernandez filed a partial concurrence and dissent. The majority overruled Fogel on one part of his calculation, but that will probably only reduce the restitution by $200,000, to $450,000. Gordon’s attorney, William Genego Jr. of Santa Monica, Calif.’s Nasatir, Hirsch, Podberesky & Genego, said that he plans to ask for reconsideration and en banc review, if necessary. “Restitution was not made for some large corporation to come up with some novel theory of loss,” Genego said. The attorney agreed with Fernandez’s dissent, which argues that a criminal restitution proceeding was not designed for the complex mechanism that Fogel used to calculate the loss to Cisco Systems. Rather, Fernandez said, such an argument is more appropriately conducted in a civil proceeding of some kind. “No doubt, courts can massage and explicate the ‘date of loss’ concept, but no authority supports doing what the district court did here,” Fernandez wrote. “We should not inflict this sort of thorny complexity upon all of the district courts in this circuit, even if a few district judges enjoy embracing this genus of legal cacti.” Besides discussing the restitution, the opinion also spends some time discussing personal details about the defendant. At the time he was arrested, Gordon was a wealthy, well-known executive apparently at the height of his game. Some questioned why he would even want to steal the money. At his sentencing, Genego compared Gordon to John Nash, a talented mathematician who suffered from mental illness and whose life was depicted in the film A Beautiful Mind. The circuit judges were also disturbed that Gordon was a Stanford law graduate and had once clerked for a judge on the 7th Circuit. According to the first sentence of the opinion, “This case presents the disappointing story of a promising federal appellate law clerk gone bad.”

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