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SAN FRANCISCO — The city’s best-known white-collar defendant says he needs the cooperation of prosecutors to defend himself against charges of securities fraud. The government, unsurprisingly, doesn’t seem to like that idea. Over the last few weeks, lawyers for Gregory Reyes, the ex-CEO of Brocade Communications — and the first person to be charged in the burgeoning stock-option-backdating prosecutions — have been frustrated as former company employees have invoked the Fifth Amendment in refusing to be deposed as Reyes prepares to defend against Securities and Exchange Commission civil charges of stock fraud. That’s a problem, Reyes’ lawyers say in court filings, because these same witnesses were granted temporary immunity by federal prosecutors to give government investigators their story — setting up what defense lawyers call an unfair advantage for the government. Their solution: extend the immunity to cover defense depositions, a suggestion the government seems unlikely to follow. Since the SEC and the San Francisco U.S. Attorney’s Office charged former Brocade executives with backdating employee stock options in July, the case has been a publicly contentious matter, with defense counsel loudly denouncing the government in court and in the media. Tensions have increased in the past few weeks as evidentiary matters in the SEC civil case have started to overlap with the pending criminal prosecution. That’s relatively rare, as most judges will separate such cases, staying the SEC civil suit until the resolution of the corresponding criminal case. But Northern District of California federal Judge Charles Breyer has decided to move the cases forward in tandem. A TRICKY SITUATION That set the stage for an awkward situation for at least 10 or so former Brocade employees. Granted immunity by federal prosecutors for a single interview session with lawyers from the U.S. Attorney’s Office and the SEC, they coughed up what they knew about the case. Not so when defense lawyers for Reyes and former human resources manager Stephanie Jensen — who are charged in both the criminal and civil cases — and former CFO Antonio Canova, who faces only SEC charges, tried to depose them. “At the first such deposition on Friday, Jan. 19, 2007,” Reyes’ lawyer, Richard Marmaro, wrote in a brief filed last week, one witness who had been debriefed by government lawyers “invoked the Fifth Amendment in response to all questions other than her name and address.” Marmaro wrote that the other witnesses did the same thing, handcuffing his ability to defend the civil case. “We are seeking to depose all of the witnesses who have any information on the charges in the SEC complaint,” Marmaro, a partner at Skadden, Arps, Slate, Meagher & Flom, said last week. Because those charges seem to be based on witness interviews conducted with temporary immunity — referred to as “queen-for-a-day” immunity — he argues that the defense team should have access to the same information. That’s not possible without a broader grant of immunity, something the government has so far declined to offer, forcing an invocation of the Fifth Amendment that defense counsel, Marmaro said, think “is not only improper, but contrary to the truth-finding process.” Indeed, he wrote in a characteristically aggressive brief, the government and its witnesses seem to be cooperating in an inappropriate fashion. “When a witness submits freely to questioning by governmental representatives who contend that a fraud occurred (and have the power to prosecute) but declines to answer questions from private-sector parties who contend no fraud occurred (and lack the power to prosecute), something other than a fear of prosecution is obviously afoot,” he wrote. Walter Brown, a partner at Orrick, Herrington & Sutcliffe who represents 11 witnesses in the case, didn’t have much to say. “I’ve received the motion and we intend to respond,” he said. THE IMMUNITY SYNDROME But it’s unlikely that a lawyer in Brown’s position would let his clients be deposed without a guarantee of immunity, according to Peter Henning, a professor at Wayne State University Law School and an expert on white-collar prosecutions. Henning said prosecutors are unlikely to make such a guarantee at this late stage of a case. “They don’t want to go down that road, and they certainly don’t want to be forced to do it,” he said. Furthermore, he said, Breyer is unlikely to honor Marmaro’s request to order the government to facilitate depositions, because case law discourages judges from ordering immunity. Marmaro seemed especially perturbed with the recent nondeposition of one witness. “It is difficult to comprehend how the witnesses now before the court can credibly claim fear of self-incrimination,” he wrote, pointing to the example of a former Brocade compensation and benefits analyst who had met with the Justice Department and the SEC — and with lawyers for two defendants — before even hiring a lawyer. “Yet, once she retained counsel, Brown, Ms. Weaver suddenly expressed a desire to invoke the Fifth Amendment in response to all questions from the defendants in this case at her deposition on January 19, 2007. “She now purports to fear incriminating herself by answering such benign questions as her educational background, whether she had ever met with the SEC or DOJ, whether she knew the civil defendants (even though one was sitting in the deposition room), whether she would testify if summoned by the SEC at trial, and virtually any other topic other than her name and address,” Marmaro wrote. The easiest way out of the muck, Henning said, would be for Breyer to stay the civil case until the criminal trial is over. But that could be a problem — Breyer said at a Jan. 17 hearing that he wants to move the Brocade trial along without delay because he’s planning to hold civil trials in the fall in two massive drug tort cases. If the judge is unwilling to issue a stay, Henning said, more wrangling is likely in the works. “It’s a mess,” he said.
Justin Scheck is a reporter for The Recorder , the ALM publication in which this article first appeared.

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