Goyal

Prabhat Goyal, former chief financial officer of Network Associates, Inc. (“NAI”), appeals from his convictions on fifteen counts of securities fraud and making materially false statements to auditors. The government alleged that NAI, under Goyal’s supervision, violated generally accepted accounting principles (“GAAP”) by recognizing revenue from certain software sales earlier than it should have. Goyal was indicted for concealing the allegedly improper accounting from NAI’s outside auditors and for filing reports with the Securities and Exchange Commission that, because of NAI’s accounting, allegedly misstated revenue in certain reporting periods between 1998 and 2000. Goyal argues that no jury could have found him guilty beyond a reasonable doubt, as the jury below did, based on the evidence the prosecution presented at trial. We agree, and we reverse his convictions on all counts.

I. Background

From approximately 1997 to 2001, Goyal was chief financial officer of NAI. NAI, formerly known as McAfee, was and remains a major vendor of antivirus and network security software.

Before 1998, NAI used a “direct sales” business model, meaning that it primarily sold its…

concurring:

This ease 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 , 125 S.Ct. 2129 , 161 L.Ed.2d 1008 (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. 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…

Donald M. Falk, Mayer Brown LLP, Palo Alto, CA, for Amicus National Association of Criminal Defense Lawyers.

Before: ALEX KOZINSKI, Chief Judge, J. CLIFFORD WALLACE and RICHARD R. CLIFTON, Circuit Judges.

CLIFTON, Circuit Judge:

Prabhat Goyal, former chief financial officer of Network Associates, Inc. ("NAI"), appeals from his convictions on fifteen counts of securities fraud and making materially false statements to auditors. The government alleged that NAI, under Goyal's supervision, violated generally accepted accounting principles ("GAAP") by recognizing revenue from certain software sales earlier than it should have. Goyal was indicted for concealing the allegedly improper accounting from NAI's outside auditors and for filing reports with the Securities and Exchange Commission that, because of NAI's accounting, allegedly misstated revenue in certain reporting periods between 1998 and 2000. Goyal argues that no jury could have found him guilty beyond a reasonable doubt, as the jury below did, based on the evidence the prosecution presented at trial. We agree, and we reverse his convictions on all counts.

From approximately 1997 to 2001, Goyal was chief financial officer of…