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Brocade Backdating Trial Could Hang on a Perry Mason Moment

"Backdating is not illegal if you don't get caught," Judge Charles Breyer

The prosecution waltzed into the second day of the first backdating trial - the case against ex-Brocade CEO Greg Reyes - armed with 11th hour testimony from ex-Brocade HR staffer June Weaver that Reyes - whose defense is that he didn't know backdating was wrong - told her, "It's not illegal if you don't get caught."

Judge Charles Breyer, who called the statement "inculpatory," had to go off and decide whether the jury would hear the Weaver punch line because the prosecution didn't share it with the Reyes' lawyers until Tuesday morning.

The prosecution, which only learned of the statement April 30, said that according to the rules it didn't have to tell the defense, which of course wanted the testimony blocked.

Both sides filed briefs on admissibility, but the legal newspaper The Recorder, reporting from the courtroom Wednesday, said the judge decided to allow it.

When defense counsel warned Judge Breyer that he might be overturned, he said, "That comes with the territory."

Weaver doesn't remember the context in which Reyes allegedly made the remark but claims it must have been about backdating since that was all they ever talked about.

After the ruling, the paper described the defense as seeming "sickly nervous," with the judge clearly impatient with its protracted questioning of witnesses on issues that seemed to have little to do with the matter at hand and the defense begging the court's indulgence.

After Weaver testified Wednesday, Reyes' lawyer Richard Marmaro - out of the hearing of the jury - moved for a mistrial, claiming it was unduly prejudicial, context by inference and a matter of due process.

Judge Breyer allowed the motion but indicated he thought it had little chance of succeeding.

Indicted last July, Reyes is up on 12 counts of securities fraud, mail fraud, falsifying board minutes and company records and filing false statements with the SEC and could do serious jail time if convicted, not to mention million in fines.

Reyes' lawyers argue that backdating was an open company policy, done to attract the best talent and hurt no one. They say Brocade's first auditors Arthur Anderson never raised an eyebrow.

Reyes, who took Brocade public, didn't get any backdated options himself.

The federal prosecutors claim he made the company seem more profitable than it was by not expensing the options.

The trial could run a couple of months and is supposed to be a template for other backdating cases.

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