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Ex-Network Associates Finance Chief Wins Reversal

Dec. 10 (Bloomberg) -- Prabhat Goyal, the former Network Associates Inc. chief financial officer convicted in 2007 of securities fraud and of making false statements to auditors, won reversal on all 15 counts on appeal.

The U.S. Court of Appeals in San Francisco today agreed with Goyal’s argument that, based on the evidence presented by prosecutors at his trial, no jury should have convicted him.

“Even viewing the evidence in the light most favorable to the prosecution, no reasonable juror could have found Goyal guilty beyond a reasonable doubt on any of the charges against him,” the three-member panel said in its ruling.

Goyal worked at the computer security software maker, now known as McAfee Inc., until 2000. The Santa Clara, California-based company is being acquired by the chipmaker Intel Corp.

A federal grand jury indicted Goyal in 2004 for conspiring to secretly pay distributors to buy more inventory than they could sell during a given quarter and to hold onto the excess instead of returning it to the company.

The fraud caused Network Associates to overstate revenue by more than $470 million and understate losses by about $330 million from 1998 to 2000, according to the indictment.

“We’re extremely gratified by the court of appeals’ careful and unassailable opinion,” said attorney Seth Waxman, who argued the case on appeal for Goyal.

No Time Served

Goyal, in October 2008, was sentenced to serve one year and one day in prison for each count, with the terms to run concurrently, according to the trial court’s electronic docket. Waxman said his client never served that time and was free on bail pending the outcome of the appeal.

“We are in the process of reviewing the decision,” said Jack Gillund, a spokesman for the office of U.S. Attorney Melinda Haag in San Francisco.

“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,” said Alex Kozinski, the court’s chief judge, in a concurring opinion.

The trial judge should have dismissed the case, Kozinski said.

“Although we now vindicate Mr. Goyal, much damage has been done,” he said. “One can only hope that he and his family will recover from the ordeal. And, perhaps, that the government will be more cautious in the future.”

The case is U.S. v. Goyal, 08-10436, U.S. Court of Appeals for the Ninth Circuit (San Francisco). The lower court case is U.S. v. Goyal, 04-cr-00201, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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