Back on July 3, at the end of the prosecution’s case, Judge Breyer reserved decision on Reyes’s motion for a judicially-ordered acquittal, evidently assessing the evidence of Reyes’s criminal intent at the time as so thin as to border upon the legally insufficient. He took the motion under advisement while the defense presented its case and, then, continued doing so while the jury deliberated. He made up his mind on August 3, when he signed the order, though he did not file it publicly until after the jury spoke yesterday.

In the opinion, Breyer discusses both the issue of materiality (i.e., whether the non-cash expenses avoided through backdating were the sort of thing a reasonable investor even cared about) and the issue of criminal intent (did Reyes understand that backdating was wrong). On a motion like this, the judge is not supposed to decide how he himself would have voted had he been on the jury, but merely whether “a reasonable juror” could vote to convict, based on the evidence presented.

He seemed to find “materiality” the easier issue of the two questions to resolve. The prosecution didn’t have to prove, he said, that the additional non-cash expenses that were concealed through backdating would have changed an investor’s decision about whether to buy or sell the stock, but merely that a reasonable investor would have viewed that information as “as having significantly altered the ‘total mix’ of information made available.” He cited the testimony of a Fidelity analyst, who said that his firm looks unfavorably on any company that grants in-the-money options, since such options don’t motivate employees the way options are supposed to. A second analyst had also testified, in Breyer’s paraphrasing, said that “non-cash expenses, though perhaps not the most important metric of a company’s value or performance, were nonetheless pertinent to his investment decisions.”

Ultimately, Breyer’s verdict on materiality was a common sensical one: “If investors really did not care about the compensation expenses created by stock options,” he wrote, “the jury would be entitled to ask why the company went to the trouble of pricing them retrospectively, rather than just granting options in-the-money and accepting the accompanying accounting charge. If investors truly did not care about non-cash compensation expenses, then why bother to keep them off the books?”

When it came to the tougher question — whether a reasonable juror could find that Reyes’s criminal intent had been proven beyond a reasonable doubt — Breyer listed all the pieces of evidence weighing against Reyes, beginning with testimony that Reyes had baldly lied about the company’s retrospective pricing policy to the attorney conducting the company’s internal investigation in late 2004 and early 2005. Maybe the most stern and striking entry in Breyer’s list of evidence was his inclusion of the simple fact that Reyes had signed the firm’s financial statements, which somewhere included a line stating that the company had accounted for stock options in accordance with Accounting Principles Board Opinion 25, “whereby the difference between the exercise price and the fair market value at the date of grant is recognized as compensation expense.” Breyer’s unforgiving judgment: “Although a jury could view Reyes’ knowledge about the precise contents of these documents with skepticism, given his supervisory role as CEO, it would also be reasonable for a jury to infer from his approval of these documents that Reyes understood the accounting treatment of stock options described therein.”

While signing an inaccurate financial statement may not alone be sufficient to convict a CEO, it has consequences, and evidently helps take his case to the jury.

Sounds right to me. What do other people think?