Never mind the eye-popping $620 million forfeiture by William McGuire, former chief executive of United Health Group Inc., to settle lawsuits over the timing of his stock options.

And ignore for now the conviction a day earlier of Stephanie Jensen, the former personnel director of Brocade Communications Systems, on charges of conspiracy and falsifying records in another options backdating case.

It turns out last week was not such a banner week for prosecutors and plaintiffs lawyers pressing the stock options backdating scandal.

Lawyers for Gregory Reyes, Brocade's former chief executive, who was convicted of 10 counts relating to backdated stock options in August, filed a brief last Friday seeking a new trial based on "new evidence" that came to light during the Jensen case.

Their claims seem ripped from the pages of a John Grisham novel: Elizabeth Moore, the former stock administrator in Brocade's finance department, testified for two days during the Reyes case.

Reyes' motion describes Moore's testimony as the "linchpin" of the closing argument delivered by prosecutor Timothy Crudo, who referred to her testimony 25 times in his plea to the jury. Now, according to the motion for new trial, this "key witness" has "recanted" her testimony.

The brief cites a few examples from Crudo's speech, in which he said Moore "didn't know what was going on. She was kept in the dark." In the wake of Reyes' conviction, Moore apparently got angry about how her words were characterized.

Moore put it into writing:

"I want to help Greg so much, it's all I think about. I've read the closing arguments over and over and I'm angry with Crudo twisting around what I said and bullying me into saying something I didn't intend to say. I've read those dreaded lines I said over and over and I can't believe it carried as much weight as it did. I was a nobody in finance, I just processed paperwork. I want to find a way to fix this, my heart is heavy with guilt and I want to fix this now."

That comes from an Oct. 24 email to Reyes' personal assistant, who had reached out to Moore while gathering letters of support in anticipation of his eventual sentencing hearing.

At the time, Moore was heading toward testifying in the trial against Jensen. She never did. Shortly before the Jensen trial began, Moore retained new counsel and informed prosecutors that she intended to assert her Fifth Amendment privilege if called to testify.

An email from Crudo said that Moore's counsel declined to elaborate, "except to add that the information was somehow related to her prior testimony."

Moore has since been mum and has made clear that she intends to remain so until she is granted immunity. So as they seek to appeal Reyes's conviction, defense lawyers from Skadden, Arps, Slate, Meagher & Flom have fallen back on some potentially explosive emails she had sent to Reyes's personal assistant. They are also using an affidavit from James Hulburd, now an executive in private banking at Merrill Lynch, who provided financial services to Reyes for many years.

Hulburd had several conversations with Moore after the Reyes trial; he says that Moore told him she was "extremely distraught" about the convictions. He says that in one telephone conversation, Moore "told me certain aspects of her testimony had not been truthful."

While the finance department didn't call it "backdating," Moore told him "everybody knew of this practice, and that neither she nor anyone else at Brocade thought there was anything wrong with it."

Moore was also angry because the company's former comptroller, Bob Bossi, "had not come forward because he could have set the record straight."

When Hulburd asked why Moore had not testified truthfully at the trial, she say she was "concerned about being fired from her job at Brocade, and about being blacklisted and having difficulty getting another job."

Short of a new trial, the Skadden lawyers are asking for an evidentiary hearing to evaluate Moore's testimony. Brocade, which is footing the cost of Reyes's defense, can probably expect more bills from Skadden.

Defense costs for Brocade contributed to more than $38.4 million in legal fees in the first two quarters of this year, including $18 million spent in the second quarter --- a number that exceeded its net income.

And even if the John Grisham brief doesn't impress U.S. District Judge Charles Breyer, there is more good news for Reyes as he heads toward his sentencing hearing: The judge unsealed an opinion last week assessing the government's arguments for enhancing Reyes's sentence under the federal sentencing guidelines.

One key method for ratcheting up a prison term for securities fraud is to show the amount of loss to investors attributable to the defendant's crime. But Breyer rejected all four methods proposed by prosecutors, finding "the government has failed to quantify any amount of loss that can be attributed to Reyes' conduct."

As a result, Breyer is contemplating a sentence of 15 to 21 months, rather than the 265 to 365 months proposed by the prosecutors.

Where was the harm? That is what defense lawyers have been saying about backdating since the scandal broke, and why, they say, the scandal ended up having short legs.

"People are not quite as breathless about options," says one lawyer in private practice. There have been at least 140 investigations opened in the past year, and a cottage industry for the defense lawyers who specialize in conducting internal investigations and fending off the regulators.

But, except in the "egregious cases," this lawyer predicts, "you will see a relatively small proportion of them being charged by the S.E.C." The backdating revelations have resulted in very few stock drops, meaning no damages for securities fraud, and, thus, no class actions.

But hark! The subprime scandal looms large, and it appears to have some very long legs indeed.

by Karen Donovan