In a case decided last Friday (December 10), a three-judge panel from the Ninth Circuit Court of Appeals threw out the conviction of Prabhat Goyal , former CFO of Network Associates, Inc., the producer of antivirus and network security software formerly known as McAfee. What makes this reversal so remarkable is that the panel tossed out the verdict not on the basis of some misstatement of the applicable law by the judge.
We are often told that prosecutors have limited resources, and therefore they carefully weigh each case in advance in order to make sure that they bring only their very strongest cases. But in this instance, the three-judge panel tells us, the prosecutors brought a case in which no juror, even if he construed all the evidence in a way most favorable to the prosecution, could rationally have voted to convict. It is easy to see why the appeals court so ruled. Goyal was charged with seven counts of lying to the SEC, seven counts of lying to the company auditors, and one count of securities fraud (namely, a fraud against investors by overstating corporate revenue). But all that Goyal did was to choose an aggressive method of accounting that enhanced corporate revenue to meet quarterly targets. The jury heard no evidence that the method was improper under the Generally Accepted Accounting Principles, or that Goyal intended to deceive anyone by his choice of accounting methods, or that his accounting methods materially affected the company's reporting.
It says much about the climate of hostility that has been created against businessmen in this country that, despite all this, the prosecutors did bring the case, twelve jurors did vote to convict, and the trial judge, Susan Illston, did uphold the verdict. In fact, the judge proceeded to sentence Goyal to more than one year in prison.
Fortunately, the decision of the appeals court had a second happy outcome, in addition to Goyal’s acquittal. One of the members of the three-man panel was Chief Judge Alex Kozinski, and in a brief concurring opinion he proceeded to let the prosecutors have it with both barrels. Here is Kozinski’s statement in full:
Chief Judge KOZINSKI, concurring:
"This case has consumed an inordinate amount of taxpayer resources, and has no doubt devastated the defendant's personal and professional life. The defendant's former employer also paid a price, footing a multimillion dollar bill for the defense. And, in the end, the government couldn't prove that the defendant engaged in any criminal conduct. This is just one of a string of recent cases in which courts have found that federal prosecutors overreached by trying to stretch criminal law beyond its proper bounds. See Arthur Andersen LLP v. United States, 544 U.S. 696, 705-08 (2005); United States v. Reyes, 577 F.3d 1069, 1078 (9th Cir. 2009); United States v. Brown, 459 F.3d 509, 523-25 (5th Cir. 2006); cf. United States v. Moore, 612 F.3d 698, 703 (D.C. Cir. 2010) (Kavanaugh, J., concurring) (breadth of 18 U.S.C. § 1001 creates risk of prosecutorial abuse).
"This is not the way criminal law is supposed to work."
"This is not the way criminal law is supposed to work. Civil law often covers conduct that falls in a gray area of arguable legality. But criminal law should clearly separate conduct that is criminal from conduct that is legal. This is not only because of the dire consequences of a conviction--including disenfranchisement, incarceration and even deportation--but also because criminal law represents the community's sense of the type of behavior that merits the moral condemnation of society. See United States v. Bass, 404 U.S. 336, 348 (1971) ('[C]riminal punishment usually represents the moral condemnation of the community . . . .'); see also Wade v. United States, 426 F.2d 64, 69 (9th Cir. 1970) ('[T]he declaration that a person is criminally responsible for his actions is a moral judgment of the community . . . .'). When prosecutors have to stretch the law or the evidence to secure a conviction, as they did here, it can hardly be said that such moral judgment is warranted.
"Mr. Goyal had the benefit of exceptionally fine advocacy on appeal, so he is spared the punishment for a crime he didn't commit. But not everyone is so lucky. The government shouldn't have brought charges unless it had clear evidence of wrongdoing, and the trial judge should have dismissed the case when the prosecution rested and it was clear the evidence could not support a conviction. Although we now vindicate Mr. Goyal, much damage has been done. One can only hope that he and his family will recover from the ordeal. And, perhaps, that the government will be more cautious in the future."
Perhaps. But I would not count on it.