In Vacating the Conviction of Network Associates' Former CFO, the Ninth Circuit Reminds Prosecutors That Accounting Fraud Prosecutions Carry A High Evidentiary Burden
In a decision last week that will come as welcome news to corporate executives involved in a company’s accounting functions, the U.S. Court of Appeals for the Ninth Circuit held that federal prosecutors who charge accounting fraud must prove willful and knowing deception on the part of the defendant – and not merely that the defendant wanted to maximize company performance or had knowledge of accounting rules. In United States v. Goyal, No. 08-10436, 2010 WL 5028896 (9th Cir. Dec. 10, 2010), the Ninth Circuit reversed the conviction of Prabhat Goyal, the former CFO of Network Associates, Inc., who had been charged with securities fraud, making false filings with the SEC, and making false statements to auditors. Holding that no reasonable juror could have convicted Goyal based on the evidence presented at trial, the court did not merely vacate the conviction on all fifteen counts. It also took the somewhat unusual step of terminating the prosecution by ordering the district court to enter a judgment of acquittal.