Options Backdating

We run ATL on a shoestring budget, so we can’t exactly afford to send reporters across the country. Taking the train up to New York, to cover a hearing in L’Affaire Charney, is already a big deal for us.
So we’re delighted when tipsters give us eyewitness reports on breaking news. Today we had a correspondent in the courtroom when the jury returned with its verdict in the stock options backdating prosecution of Gregory Reyes, the former CEO of Brocade Communications.
Our source filed this report:

Gregory Reyes Greg Reyes Brocade Communications Abovethelaw Above the Law blog.jpgJury verdict: Guilty on all counts. Not really a scoop, since it’s all over the media. But we were there and wanted to share.

Courtroom was two rows of press, armed with laptops and blackberries, and three rows of N.D. Cal. externs, armed with nothing else to do during the last week of their externships. And miscellaneous district court clerks, hangers-on, and family.

Reyes’s family was sobbing when the deputy read off the verdict. It was pretty rough. Then a couple of jurors broke out in tears too. Can’t say I envy them.

Or, for that matter, Gregory Reyes. The former member of the Forbes 400 — which he first appeared on at age 37, with a net worth of $1 billion — is presumably headed for federal prison.
Update: ATL’s San Francisco correspondent had this to add:

Judge Breyer [Charles R. Breyer, li'l brother of Justice Breyer] gave the defense one week to file a motion for new trial, partly because he wants to be able to rule on it while the case is fresh in his mind, but also because he’s confident that both sides will be able to staff it on that schedule, or something to that effect. I love it when judges basically tell big firms, “You’ve got enough manpower to throw at this.”

Sentencing is set for November 21. Reyes gets to remain free until then.

Jury Finds Brocade Ex-CEO Guilty on Backdating Charges [WSJ Law Blog]
Ex-Brocade Chief Convicted in Backdating Case [Associated Press]

M Todd Scott Orrick Herrington Sutcliffe Above the Law.JPGTruth be told, we find the stock options backdating story a little boring. But every now and then, it results in mildly interesting news.
From the Recorder:

A fourth-year associate at Orrick, Herrington & Sutcliffe inadvertently disclosed a sensitive document about stock option backdating that the firm has spent the last five months fighting to keep under seal.

The document — a complaint in a shareholder derivative action against former executives of Mercury Interactive Corp. — contains explosive allegations against the executives and quotes extensively from e-mails in which the executives allegedly discuss backdating their own stock options….

The complaint, Morillo v. Abrams, 1:05-cv-50710, had been filed under seal on Sept. 22 as part of a confidentiality agreement with the executives’ lawyers — but without judicial approval. The Recorder and two other news organizations have been trying since then to unseal the complaint and its supporting exhibits.

But a Dow Jones News Service reporter discovered Friday that Orrick associate M. Todd Scott had inadvertently filed the complaint publicly with a motion to stay the derivative action in October. The Wall Street Journal posted the complaint on its Web site over the weekend and wrote a story about it on page A-4 of Tuesday’s print edition.

Whoops! There goes five months’ worth of legal battles.
Our personal view is that filing under seal is greatly overused, even abused. But if you’re going to file under seal, then file under seal.
(We do feel bad, however, for Mr. Scott. We’re guessing he was operating under inadequate sleep. And when associates are exhausted and overworked, mistakes will get made.)
Oops! Orrick Associate Lets Slip Mercury Backdating Document [The Recorder via Law.com]

* “[P]rosecutors will be investigating the backdating of stock options by companies for ‘years to come.'” [WSJ Law Blog]
* “A state appeals court on Thursday rejected a lawsuit by a boy who wanted to compete on his high school’s girls’ gymnastics team.” [Sports Illustrated]
* Anna Nicole gets booted from another ex-boyfriend’s mansion. [CNN]
* DHS wants to know what you eat on the airplane… [CNN]
* … and your boss wants to know what your IMs say (e-discovery). [MSNBC]

musical chairs 2 Above the Law legal blog above the law legal tabloid above the law legal gossip site.GIFWe’ve fallen a bit behind in telling you who is going where, and why. So here’s a short recap of notable recent moves within the legal profession:
From Law to Finance:
* It’s rare for partners to leave Wachtell Lipton, but it does happen. Earlier this month, former WLRK corporate partner Mitchell Presser left the firm, to join Fox Paine. Presser, renowned at Wachtell for his impeccable taste in sushi, focuses on deal structuring and new investment opportunities at Fox Paine.
New Partners:
* Simpson Thacher & Bartlett: Eight new partners in New York. Corporate: Barrie Covit, John Ericson, Ellen Reilly Patterson, Kathryn King Sudol. Executive compensation and employee benefits: Gregory Grogan. Real estate: Sasan Mehrar. Litigation: Michael Garvey and George Wang (whom we know, and who are both very fine lawyers — congrats, guys).
* Willkie Farr & Gallagher: Eleven new partners in New York. Corporate and financial services: Leah Campbell, Mark Cognetti, Morgan Elwyn, Rita Molesworth (luv the name), Adam Turteltaub. Litigation: Mary Eaton, Scott Rose, and former AUSA Michael Schachter. Tax: Christopher Peters. Business reorganization and restructuring: Rachel Strickland.
You may recall Michael Schachter as the superstar federal prosecutor in the Southern District of New York, who helped send Martha Stewart to prison (where she learned to make delicious dishes using vending machine fare and the inmates’ communal microwave).
* Weil Gotshal & Manges: Twenty new partners around the country. That’s too many for us to reprint here, so check out the list in the press release.
A majority of these twenty partners are women, and two are “flex-time partners.” Details here.
Out the Door:
* Myron Olesnyckyj, former general counsel of Monster Worldwide Inc. (which owns Monster.com). Stock options backdating. Yawn.
* And a bunch of execs at ACS and Quest Software, also because of backdating. Some lawyers, some not. Double yawn.
NY Biglaw Associates Making Partner [NYLawyer.com]
Another GC Axed Over Stock-Options [NYLawyer.com]
Backdating: More Resignations, More Legal Business [WSJ Law Blog]
Weil Gotshal Elects Twenty to Partnership and Appoints Five as Counsel [Weil Gotshal & Manges]
Weil’s Partnership Class Has More Women Than Men: News? [WSJ Law Blog]

musical chairs above the law legal blog above the law legal tabloid above the law legal gossip site.GIFLaw Firm Mergers:
Actually, they’re really acquisitions:
* Washington-based Crowell & Moring is building up its New York office by acquiring King Pagano Harrison, the health care/labor-and-employment boutique, and by picking up partners from IP boutique Morgan & Finnegan.
* Philadelphia-based Drinker Biddle & Reath is “merging” with Chicago-based Gardner Carton & Douglas. The new entity will keep the Drinker Biddle name and will be chaired by Drinker Biddle’s current chairman, Alfred W. Putnam Jr.
(Translation: Gardner Carton = Drinker Biddle’s beeatch.)
Out the Door:
* Casualties of the options backdating scandal: Bruce Karatz, CEO of KB Home (and a lawyer by training), and Richard Hirst, KB Home’s chief legal officer.
Crowell & Moring Acquires 20 Lawyers From Litigation Boutique [Legal Times via Law.com]
Firm Boosts NY Office With Boutique Acquisition, Raid [NYLawyer.com]
Firms Merge [NYLawyer.com]
Backdating Scandal Fells Top Homebuilding CEO [WSJ Law Blog]

* German citizen files state action to block sale of Picasso painting after federal action was dismissed earlier this week. [CNN]
* Talk about court tv: Cablevision is involved in a little bit of litigation. [WSJ Law Blog]
* Prosecutors file 12 murder counts in Reno Halloween hotel fire. [Reno Gazette-Journal]
* Must not have been a very good fence. [MSNBC]
* Barot (almost like Borat, except not funny and a terrorist) gets life for bomb plots.[MSNBC]

musical chairs above the law legal blog above the law legal tabloid above the law legal gossip site.GIFA number of big-ticket moves to report today. The most notable involve government lawyers:
Government to Private Sector:
* Debra Wong Yang, the U.S. Attorney for the Central District of California (Los Angeles), has resigned from the USAO. She’s headed to Gibson, Dunn & Crutcher, as a partner (duh). Ka-ching!
Yang will work out of the firm’s L.A. office. She will co-chair its Crisis-Management Group, along with former Solictor General Theodore Olson and another former federal prosecutor, Randy Mastro.
At Main Justice:
* Jonathan Cohn (OT 2000/Thomas) is now the Deputy Assistant Attorney General for Civil Appellate. He was previously the DAAG overseeing the Office of Immigration Litigation (and will continue to discharge that duty until a successor is found).
rachel brand jonathan cohn.JPGAt right: Jonathan Cohn and his wife, Rachel Brand (OT 2002/Kennedy), the Assistant Attorney General for the Office of Legal Policy. Although his portfolio has changed (and we’d say for the better), he doesn’t have to get new business cards, since he’s still a DAAG.
Out the Door:
* Casualties of the stock options backdating scandal: Stuart Nichols, former general counsel of KLA-Tencor, and David Lubben, former general counsel of UnitedHealth.
Lateral Moves:
* Corporate lawyer Arthur Hull Hayes III, to Sonnenschein Nath & Rosenthal, from Dewey Ballantine.
* Technology, media, and telecom lawyer Carole Aciman, to Greenberg Traurig, from Hughes Hubbard & Reed.
* King & Spalding: The intellectual property practice acquires five new lawyers: Kenneth Sonnenfeld (NY) and John Harbin, Tony Askew, Steve Schaetzel, and Jim Johnson (in Atlanta). They came from Morgan & Finnegan (Sonnenfeld), Powell Goldstein (Harbin), and Kilpatrick Stockton (Askew, Schaetzel and Johnson).
And Another One Gone, And Another One Gone… [WSJ Law Blog]
L.A. U.S. Attorney Debra Yang Resigns; Will Join Gibson Dunn [WSJ Law Blog]
NY Partners Switching Firms [NYLawyer.com]
More NY Partners Switching Firms [NYLawyer.com]

musical chairs above the law legal blog above the law legal tabloid above the law legal gossip site.GIFOut the Door:
* CNET’s former general counsel, Sharon Le Duy — resigns — another casualty of the stock options backdating scandals.
Lateral Moves:
* ERISA lawyer Dana Scott Fried, to Loeb & Loeb, from Brown Raysman Millstein Felder & Steiner.
Is Dana Fried an ERISA hottie? Perhaps. You be the judge; here’s his bio (with photo).
* Corporate and securities lawyer Mark Thierfelder, to Dechert, from O’Melveny & Myers.
* Tax specialist James Tander, corporate lawyer Patrick de Carbuccia, and real estate lawyer Michael Pollack, all to Reed Smith (NY); they come from, respectively, Skadden Arps (as counsel), Willkie Farr (as an associate), and British trusts and estates boutique Withers Bergman (as head of the real estate practice).
CNET Joins the Backdating Parade; Its General Counsel Resigns [WSJ Law Blog]
Firm Boosts NY Office With Three Lateral Partners [NYLawyer.com]
NY Partners Switching Firms, NY Associates Making Partner [NYLawyer.com]

mark foley.JPG* “If Mark Foley had sex with a page in the District of Columbia, it wouldn’t be a crime. In the capital, the age of consent is 16, as it is in many states. That, coincidentally, is the minimum age to be a page.” [Los Angeles Times]
* The Sixth Circuit has placed Judge Anna Diggs Taylor’s warrantless wiretapping handiwork on hold. [Detroit Free Press via How Appealing]
* Some benchslapping of the government, courtesy of Second Circuit Judge Jon O. Newman: “Beatings? Exposure to air-conditioning after standing in the rain? Needless strip-searches? Never approached a due process violation? If I thought your client really believed that, I’ve got to tell you, I’d be really troubled.” [New York Times]
* The other shoe has dropped in the HP leak investigation scandal: criminal charges have been filed against former chairwoman Patricia Dunn and four others. [New York Times]
* Apple joins the options backdating scandal club. [New York Times; WSJ Law Blog]

burka burqa burkha burqha.jpg* An investigation by the Justice Department Inspector General reveals that the Bureau of Prisons doesn’t have enough staff to monitor communications of imprisoned terrorists with the outside world, including mail and phone calls. [Washington Post]
(And what about Instant Messenger? “What ya wearing?” “A burka.” “Love to slip it off you…”)
* The Supreme Court kicks off October Term 2005 — and J. Lo is in the house. José Antonio López’s appeal raises the question of what constitutes a “felony punishable under the Controlled Substances Act” (which the Court has grappled with before, and surely will again). [New York Times; Los Angeles Times; Washington Post]
* That wacky Ninth Circuit ruling from earlier this year, holding that arresting the homeless for sleeping on streets and sidewalks constitutes “cruel and unusual punishment,” may be coming home back to the shelter to roost. It could jeopardize Los Angeles’s attempted crackdown on homeless encampments. [Los Angeles Times]
* Larry Sonsini’s reputation has been tarnished by his involvement in the HP and options backdating scandals. But he’s got all his life to live, he’s got all his love to give; he will survive… [WSJ Law Blog]
* Ex-Comverse Technology CEO Kobi Alexander, wanted back in the United States on options backdating charges, is granted bail by a Namibian court, over U.S. objections. Those starstruck Namibians! Ever since Brangelina, they’re suckers for the rich and (in)famous. [Associated Press]

Page 1 of 212