United States v. Reyes, 2011 U.S. App. LEXIS 20721

Reyes, former CEO and Chairman of Brocade, was convicted in a second trial of securities fraud, falsifying books and records, and making false statements to auditors related to backdated stock options.
Backdating of Brocade stock options occurred 2000–2004 and was misrecorded as non-cash compensation per APB 25; the practice was later restated as required.
Reyes approved option grants to employees; the Compensation Committee and full Board approvals were required for officer and non-officer director grants, respectively.
The government alleged Reyes knowingly benefited from the backdating scheme and signed grant lists containing his name, aiding in date selection.
This appeal followed remand for a new trial after this court previously vacated Reyes’s first conviction for prosecutorial misconduct.
The district court admitted various evidence (motive, restatement, and corporate-responsibility evidence) and provided jury instructions, all of which Reyes challenges on appeal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the government commit prosecutorial misconduct at Reyes's second trial?	Reyes alleging false inferences about self-granting options; misstatements to jury.	Prosecution relied on false or misleading theories and evidence to prejudice the defense.	No reversible prosecutorial misconduct; evidence supported the theory and was not knowingly false.
Was the evidence of materiality sufficient to sustain the securities-fraud convictions?	APB 25 misstatements and restatements were material; investors care about earnings.	Materiality was not proven; evidence relied on circular or indirect inferences.	Evidence was sufficient; a rational jury could find materiality based on restated earnings and investor impact.

United States v. Steele, 298 F.3d 906 (9th Cir. 2002) (prosecutorial-misconduct review standard)
United States v. Murillo, 288 F.3d 1126 (9th Cir. 2002) (abuse-of-discretion review for new-trial motions)
United States v. Bracy, 67 F.3d 1421 (9th Cir. 1995) (mixed questions of fact and law review)
United States v. Blueford, 312 F.3d 962 (9th Cir. 2002) (harmless error standard and prosecutorial-misconduct framework)
United States v. Kojayan, 8 F.3d 1315 (9th Cir. 1993) (prosecutor must stay within rules and not present knowingly false evidence)
Jackson v. Virginia, 443 U.S. 307 (1980) (sufficiency of evidence for conviction; rational trier of fact standard)
Basic Inc. v. Levinson, 485 U.S. 224 (1988) (materiality standard for securities-fraud omissions)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (motive as a factor in scienter and materiality; context of total mix)
Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940 (9th Cir. 2005) (motive and scienter in securities cases)
United States v. Perkins, 937 F.2d 1397 (9th Cir. 1991) (false exculpatory statements as consciousness of guilt evidence)
Geston, 299 F.3d 1130 (9th Cir. 2002) (plain-error review for prosecutorial misconduct)
Zafiro v. United States, 506 U.S. 534 (1993) (jury instruction and trial-independent prejudice considerations)