David R. Henderson  

Henderson on Rich-Hunt

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In Rich-Hunt, philosopher Roger Donway tells the detailed story of how [Greg] Reyes ended up in this position and how little the prosecutor cared about truth, let alone justice. The result is a chilling page-turner. If you don't know much about how vague federal laws and regulations can put innocent people at risk, or if you already know but want to know more, Rich-Hunt is for you.
This is from my review of Roger Donway, Rich-Hunt: The Backdated Options Frenzy and the Ordeal of Greg Reyes, which appears in the latest issue of Regulation.

Another excerpt from my review:

Donway, who heads the Business Rights Center of the Atlas Society, makes his position clear from the outset. He sees Reyes as a hard-working, clear-thinking entrepreneurial hero. He also sees the law that Reyes was charged with violating as pernicious and vague. But even if one thinks that Reyes was not a hero, and even if one thinks that the law was a good law, Donway gives ample evidence that the legal system badly abused an innocent man. The abuse involved prosecutorial misconduct and mischievous actions by a federal judge. Another player that comes off looking very bad is the Wall Street Journal's news section, which hyped the backdating options controversy as if it was obvious that options shouldn't be backdated.

The federal judge, by the way, is Charles Breyer. People who closely followed the Ed Rosenthal trial would probably not be very surprised by his conduct.


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COMMENTS (3 to date)
KLO writes:

David,

I share your concerns over the way in which prosecutors will often aggressively pursue cases built around novel legal theories and vague laws in ways that defy all notions of justice and fair play. What I have trouble with is your (and Donway's) apparent belief that Brocade's failure to properly account for its back-dated stock options did not actually harm Brocade shareholders. GAAP accounting principles required that Brocade take non-cash charges against earnings to account for the cost of the back-dating of the stock options. Brocade, under the direction of Greg Reyes, did not do this even as it publicly proclaimed to be reporting its financials using GAAP. Whatever the merits of the GAAP approach to stock options may be, if a business claims to be following a certain set of well-recongized accounting standards and is instead making up the rules as it goes along, it is not much of a defense to offer that the ad hoc, undisclosed accounting standards that the business is using are more accurate anyway. That, in essence, is what Donway is claiming. I don't know too many shareholders of Brocade or any other enterprise who would agree with him.

David R. Henderson writes:

@KLO,
I strongly recommend that you read Donway's book.

leeotta writes:

KLO, I agree. See my review at Amazon. I read the book.

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