Citing misconduct by prosecutors, a three-judge panel of the United States Court of Appeals for the Ninth Circuit in San Francisco ordered a new trial for Reyes, who had been convicted of 10 charges of conspiracy, fraud, making false regulator filings and falsifying records for backdating hundreds of employee stock options.

A favorable turn of luck for Reyes, who had been sentenced to 21 months in prison and ordered to pay a $15 million fine for misdeeds that, according to that three-judge panel, had been grossly exaggerated and perhaps even fabricated.

“Deliberate false statements by those privileged to represent the United States harm the trial process and the integrity of our prosecutorial system,” Judge Mary Schroeder wrote in the 3-0 ruling. “We do not lightly tolerate a prosecutor asserting as a fact to the jury something known to be untrue or, at the very least, that the prosecution had very strong reason to doubt.”

The panel stopped short of throwing the case out entirely, noting that “there was no question that Reyes signed off on stock-option grants that were priced retrospectively and that the backdating allowed Brocade to understate its compensation expenses.” So the United States attorney could opt to retry the case, though that seems a bleak option at this point given the tenor of the ruling.

“This is the highest profile [backdating] case they had that went to trial, so I’d expect they will try it again, if for no other reason than for reputational purposes,” Wayne State University law professor Peter Henning told the Mercury News. “But talk about a case that’s stale.”

Reyes was charged last year with “routinely backdating stock options grants to give employees favorably priced options without recording necessary compensation expenses. From 2000 through 2004, prosecutors claimed, Reyes “used the virtually unchecked authority given to him to grant ‘in the money’ options to employees by falsifying in the options documentation the date on which the grants were made and thereby granting the options with below-market strike prices.” In doing so, they argued, he defrauded Brocade shareholders and violated generally acceptable accounting rules.

And it seems the jury called to hear the case agreed. Apparently, it too found the low-priced grants Reye’s made in committee-of-one “meetings with himself” a little bit more than suspicious.

Reyes could face a decade or more in prison for his misdeeds, which should put the fear of God into the dozens of other corporate executives who are under investigation by the Justice Department and the Securities and Exchange Commission in connection with backdated options. “This is a pretty big win for the government,” former federal prosecutor Peter Henning told Bloomberg. “It may well encourage more cases or push some investigations forward.”

Reyes was charged last year with “routinely backdating stock options grants to give employees favorably priced options without recording necessary compensation expenses. From 2000 through 2004, prosecutors claimed, Reyes “used the virtually unchecked authority given to him to grant ‘in the money’ options to employees by falsifying in the options documentation the date on which the grants were made and thereby granting the options with below-market strike prices.” In doing so, they argued, he defrauded Brocade shareholders and violated generally acceptable accounting rules.

And it seems the jury called to hear the case agreed. Apparently, it too found the low-priced grants Reye’s made in committee-of-one “meetings with himself” a little bit more than suspicious.

Reyes could face a decade or more in prison for his misdeeds, which should put the fear of God into the dozens of other corporate executives who are under investigation by the Justice Department and the Securities and Exchange Commission in connection with backdated options. “This is a pretty big win for the government,” former federal prosecutor Peter Henning told Bloomberg. “It may well encourage more cases or push some investigations forward.”