Opinion ID: 206316
Heading Depth: 3
Heading Rank: 2

Heading: Testimony of Wall Street Journal reporter Charles Forelle

Text: The prosecution also introduced a June 12, 2006, story from the Wall Street Journal (WSJ), co-written by reporter Charles Forelle and titled Monster Worldwide Gave Officials Options Ahead of Share Run Ups. The story stated that the WSJ had put[ ] the odds at about one in nine million that a pattern of grants as favorable or more favorable than Mr. Treacy's would have occurred if the dates were selected randomly, without regard to stock price. The story contained the following passages, among others: Mr. Treacy, who has since left Monster, said that, like any other employee, he had no involvement in the options-granting process, which he said was `all in the purview' of the board's compensation committee and Andrew McKelvey, Monster's founder and chief executive. He said he believes the dates were `the days that the comp committee and Andy granted' the options.... Mr. Treacy said that he didn't notice the favorable strike price at the time. I was busy working, and there was a lot to do and a lot of moving parts and a family to get home to, he said. He also said that not all of his grants were unusual. A 2001 grant came before a fall in share price, and another grant was dated on the same day the company publicly announced his promotion to president. He left the company in 2002, but remained on the board until 2003. Mr. Treacy never exercised any of his options while he was an executive. As part of his separation agreement, the company allowed him to keep them after he left. He cashed out some for the first time in December [2005], he said. Asked how much he made on the transaction, Mr. Treacy said he doesn't have to disclose the sum. I did OK, he said. But I waited a long time. Charles Forelle and Mark Maremont, Monster Worldwide Gave Officials Options Ahead of Share Run-Ups, Wall St. J., June 12, 2006, at A1. At trial, the Government subpoenaed Forelle to testify to the accuracy of the statements attributed to Treacy in his story. Forelle sought to quash the subpoena, invoking the journalist's privilege and claiming that his testimony would be irrelevant, cumulative and available from other sources. The Government argued that Treacy's statements to Forelle were made in furtherance of the conspiracy, showed his consciousness of guilt, and demonstrated his knowledge of the stock options process at Monster. The Government also argued that Forelle's testimony was the only means by which the statements could be authenticated. At oral argument on Forelle's motion to quash, the Government asked to be permitted to ask questions primarily to confirm the substance and accuracy of Treacy's statements in the story. Treacy argued that he should be able to cross-examine Forelle regarding: (1) the specific questions that led to the statements attributed to Treacy; (2) statements attributed to McKelvey; and (3) Forelle's other reporting on backdating schemes, including those at other companies. Treacy argued that he wished to show that his statements to Forelle were about his own stock options, not about options-granting generally. The district court denied Forelle's motion to quash but tightly limit[ed] both direct and cross-examination of the reporter. Dist. Ct. Mem. Ord. dated Mar. 23, 2009, at 2. The court rejected Forelle's contention that the evidence was cumulative. Applying our decision in Gonzales v. Nat'l Broadcasting Co., 194 F.3d 29, 36 (2d Cir.1999), the district court noted that the testimony sought was nonconfidential and concluded that the statements were relevant, at a minimum, as statements made in furtherance of the alleged conspiracy and false exculpatory statements evidencing consciousness of guilt, and may also prove admissible for other purposes. Id. at 4. But the court limited direct examination to four essential inquiries: (1) In or around June 2006, was Forelle a reporter for the Wall Street Journal? (2) Did Forelle interview [Treacy] during that time? (3) Did [Treacy] make statements to Forelle that Forelle subsequently reported ... ? [and] (4) With respect to each of those statements, what specifically did Forelle say to [Treacy] and what specifically did [Treacy] say in response? Id. The district court, noting that Treacy had not argued that the statements had not been made or misreported, but only that they were taken out of context, limited his cross-examination to asking about the questions Forelle had asked Treacy immediately before those that elicited the responses quoted in the story. Called to testify, Forelle confirmed that Treacy had made the statements in the WSJ article. On cross-examination, Treacy's counsel asked Forelle if what you asked him about during that conversation was Mr. Treacy's options, and Forelle replied, It's correct that I asked him about his options. Trial Tr. at 2240. Treacy's counsel then asked: And you asked him specificallythe reason you called him is because you saw his options in public filings and you wanted to ask him about it, isn't that true? Id. at 2241. The district judge sustained an objection to that question from the reporter's counsel, whom the court had previously granted permission to appear and raise silent objections where appropriate. At a sidebar conference, the district court explained that, because of the need to balance press interests with the parties' interests, Treacy could not make an open-ended attack on Forelle's credibility. Treacy attempted to ask Forelle several times about a follow-up e-mail that Forelle sent to Monster's public relations consultant in which he mentioned the interview with Treacy, but the district court ruled the questions improper. On redirect, the Government asked Forelle, were your questions to Mr. Treacy limited to his own grants or was it more broadly the grants and practices at the company as a whole? Id. at 2249. Forelle replied, It was both. Id. On inquiry from the bench, Forelle was unable to recall the specific questions he had asked that had elicited the statements by Treacy quoted in the story. Although Treacy was prohibited from cross-examining Forelle based on the follow-up e-mail Forelle had sent to Monster's public relations contact, the district court did allow Treacy to introduce the e-mail itself, which contained the following passage: Mr. Treacy says that his options' terms were all decided by the compensation committee and Mr. KcKelvey. Is this accurate? He characterizes Mr. McKelvey's role in option-awarding as principalthat Andy gave grants to senior executives. Could you expand on the role of Mr. McKelvey in determining the dates, amounts and nature of executive awards? E-mail from Charles Forelle to Peter Duda dated June 10, 2006. In its summation, the prosecution mentioned Forelle's article at several different points, and argued that Treacy's quotes in the Wall Street Journal, after the news of the backdating broke, that like any other employee, he had no involvement in the options dating process, were a `monster' lie and a bald-faced lie. Trial Tr. at 2742, 2810. The Government directly tied this observation to its broader case that [i]nstead of doing the right thing, Treacy lied over and over again. Id. at 2747. Treacy's counsel, in turn, argued in summation that the phrasing of Forelle's follow-up e-mail (Mr. Treacy says that his options' terms were all decided by the compensation committee and Mr. McKelvey, is that accurate?) showed that: (1) McKelvey was the principal force behind the backdating scheme; and (2) the conversation with the Wall Street Journal reporter was not about Treacy's relationship with the option program in toto but was specific to Treacy's grants. Trial Tr. at 2900-02.