Kent Roberts had to be sweating. During the week the jury was out in the former McAfee general counsel's options backdating trial, the market dropped nearly 1,000 points and the American financial meltdown went global. It was not the most ideal time to be the poster boy for corporate greed.

But when the jury returned Oct. 3, the verdict was not guilty. After three days of deliberation, the jury concluded that Roberts' actions, while suspect, did not meet the threshold for criminal intent. “This was under the white spotlight–an issue that drew intense investigative pressure,” says Jeffrey Stone, who leads the trial department at McDermott Will & Emery. “In a case like this, where apparently the evidence suggested that there was no intent to commit a crime, the jury ferreted that out. They really focused on the facts of this specific case.”

The timing of the Roberts acquittal is an interesting milepost. It shows that the crest has passed on backdating liability, just as the levy is breaking on what will be the next wave of white-collar prosecutions. The case also illustrates some of the difficulties prosecutors have faced in bringing tech-boom and Enron-era fraud cases to trial, and suggests lessons prosecutors may take to heart the next time around.

No Intent

Unlike some of the other high-profile backdating scandals–where general counsel were implicated in systematic backdating or covering it up–the case against Roberts focused on backdating his own options. Prosecutors honed in on a single transaction he made in 2000–shortly after he was promoted to the top legal job at the company then known as Network Associates–involving shares that Roberts never cashed.

That the date of Roberts' options was manipulated, increasing their value by almost $200,000, is a matter of record. The central issues in the trial were whether he initiated the process and knew at the time he was committing a crime. The jury concluded that the evidence didn't show Roberts had engaged in a scheme to defraud the company and acquitted him on two fraud charges.

They deadlocked on a third charge of falsifying records.

“In this case, one juror reported that the defendant had breached his fiduciary duty to his employer,” explains William Wilkins, a Nexsen Pruet partner who until this year was chief judge of the 4th Circuit. “But of course there's a significant difference between that and breaking the law.”

After Judge Marilyn Hall Patel dismissed the jury, she urged prosecutors not to pursue the accounting charge, pointing out that no money was lost and that Roberts, who was fired in 2006 when the allegations came to light, had already lost his job.

“In any fraud case, one of the touchstone issues is to show that the alleged perpetrator financially gained,” says Roma Theus, chair of the corporate integrity and white-collar crime committee at the Defense Research Institute. “Here there is no financial gain. From a jury persuasion standpoint, it's a very difficult case.”

Paper Chase

That wasn't the only difficulty prosecutors faced. The original indictment comprised seven counts, including charges that Roberts backdated options for the company's former CEO. But prosecutors dropped four counts before the trial.

Then, on the night before opening statements, the company turned over a critical set of e-mails that had been under subpoena for two years. McAfee blamed the blunder on Howrey, the firm hired to conduct its internal investigation. Howrey passed the buck to contract lawyers it had retained for document review. Still, the trial opened with a cloud of doubt hovering over the allegations.

The gaffe is just one of many problems common to such paper-heavy prosecutions.

“There were literally millions of e-mails that they went through,” says B. Todd Jones, a former U.S. Attorney. “If you do it the old fashioned way with live-body people instead of paper leading the charge, you can pivot much more quickly.”

And argue more convincingly. Jurors react to strong stories that show how a defendant conceived of and committed a crime. Highly legalistic paper chases are not effective storytelling and can mute prosecutions. In this case, the government was able to demonstrate wrongdoing, but the massive volume of e-mail could not prove intent.

Lessons Learned

Such challenges may be responsible for the fact that from the hundreds of companies embroiled in backdating scandals, only three executives have so far been brought to trial. (Roberts is the first acquittal.) Eight other executives have pleaded guilty.

“Prosecutors learn from cases such as this, both from an investigative standpoint and from the perspective of which charges are the easiest to prove,” says Jones, who is head of the white collar practice group at Robins, Kaplan, Miller & Ciresi. “That's important because subsequent events are trumping the backdating scandal. What you see going on right now in the financial markets is probably the area where you're going to see the next wave of prosecutions.”

Jones says the paper-heavy backdating cases, similar to some of the Enron prosecutions, drag out and weaken criminal trials. He points to the current, lightning-fast investigation into an alleged $3 billion Ponzi scheme at Minneapolis-based Petters Group Worldwide as an example of how fast prosecutors can move with solid witnesses to rely on.

That case progressed from an FBI raid in late September to guilty pleas by business associates and bankruptcy for subsidiaries. CEO Tom Petters is currently in federal custody awaiting a grand jury indictment.

The ongoing Monster.com backdating investigation is another example of a stronger prosecutorial tack. Former GC Myron Olesnyckyj pleaded guilty in February 2007 to backdating-related crimes that could result in up to 25 years in prison and $5.2 million in fines. His ultimate sentence, however, will depend on his cooperation with investigators, including testifying against fellow executives at any upcoming trials.

Although backdating issues are far from resolved (see “Not Backing Off”), prosecutors have limited resources, and may cut bait on some investigations to focus on crimes leading to the current financial crisis.

“Most backdating cases are starting to mature. You see one or two pop up from time to time dealing with some legacy issues, but we have crossed a peak and are on a down slope,” says Christopher Keller, a securities class action partner at Labaton Sucharow. “I think they're probably letting these things die on the vine.”