Attorney turmoil delays probes into stock options
By Brooke Mastersin New York
Published: July 20 2007 03:00 | Last updated: July 20 2007 03:00
Investigations into allegations of stock options backdating are being delayed and could be undermined by turmoil in the US Attorney's office in San Francisco, sources familiar with the probes say.
Prosecutors in San Francisco are probing options grants at dozens of companies, including Apple Computer, for possible criminal violations and handling the first criminal trial to spring from the issue, that of Gregory Reyes, the former chief executive of Brocade Communications.
But several key lawyers at the top of the office, including Kevin Ryan, the US attorney, and Chris Steskal, head of the options task force, have left, causing uncertainty and slowing some of the probes, according to sources in and out of the Department of Justice.
In some cases, the San Francisco office is moving so slowly that the Securities and Exchange Commission, which ordinarily files civil fraud cases in tandem with the DoJ, is said to be on the verge of going after violators without waiting for the DoJ. Chris Cox, the SEC chairman, said this week the agency "likely will increase the pace of announcements" in options cases.
The San Francisco slowdown is the most dramatic example of larger problems that have surfaced at the DoJ since the mass sackings of eight US attorneys, including Mr Ryan, caused a furore in February. Six top posts at the DoJ in Washington are empty or filled with temporary appointees, and 23 of the 93 US Attorney's offices around the country lack permanent political leadership.
Democrats allege that George W. Bush's administration has politicised hirings and firings within the department and have called for the resignation of Alberto Gonzales, the attorney-general.
The DoJ has not nominated a permanent replacement for Mr Ryan. Scott Schools, his temporary successor, was supposed to leave last week, but changed his plans rather than leave the office rudderless.
Carl Tobias, a University of Richmond law professor, said the San Francisco district is "perhaps the best measure of what can happen to a district without proper leadership".
But Michael Wang, chief of the criminal division in the San Francisco office, said the concerns were overblown. "Some degree of turnover is a fact of life. We have a robust inventory of white-collar cases here, and there remain extraordinary attorneys in this office who are more than capable of handling each and every one of them."
He was not concerned by reports that the SEC may move on stock options cases without the DoJ.
Copyright The Financial Times Limited 2007
IBAFT:The original team was chased away from completing their goals with threats of prosecution, as they engaged in unlawful acts for the purposes of exposing the naked short.
