FUGITIVE ALEXADER SETTLES FORFEITURE CLAIMS AND SEC CASE
Being a fugitive and fighting extradition did not impede the former chairman and CEO of Comverse Technology, Inc. from settling with the SEC and, at least in part, the Justice Department. Jacob “Kobi” Alexander, out on bail in Namibia, settled his option backdating case with the Commission. SEC v. Alexander, Civil Action No. 06-CV-3844 (E.D.N.Y. Filed Aug. 9, 2006). He also settled a civil forfeiture action which is an offshoot of the criminal case against him. U.S. v. All Funds on Deposit, Case No. 06-cv-3730 (E.D.N.Y.).
Four years ago, the SEC filed a civil fraud complaint against Mr. Alexander and two other former company executives based on option backdating claims. The complaint claims that for over a decade Mr. Alexander and others granted in-the-money options to themselves and others by backdating the grants. The complaint claims that Mr. Alexander maintained a slush fund of backdated options, created by having them granted to fictitious employees. Options from the fund were used to recruit and retain key personnel. Since the backdated options were not properly accounted for in the books and records of the company, its net income and earnings per share were materially overstated for years.
Criminal charges were filed against Mr. Alexander simultaneous with the Commission’s complaint. The charges are based on the same option backdating scheme detailed in the SEC complaint. U.S. v. Alexander, No. 06-cv-3844 (E.D.N.Y.). Shortly prior to the filing of these actions Mr. Alexander, an Israeli citizen, fled to Namibia where he was arrested. Although the U.S. has sought extradition Mr. Alexander remains free on bail in that country. Earlier this year, an appeals court in Namibia declared part of the country’s Extradition Act unconstitutional based on Mr. Alexander’s petition.
Following the institution of criminal charges, the government filed the All Funds civil forfeiture action. It sought the forfeiture of over $46 million in two investment accounts. The funds on deposit were claimed to be the proceeds of the option backdating scheme. Mr. Alexander and his wife contested the case. The district court struck his claims primarily because he is a fugitive. That ruling is on appeal.
The Commission’s case and the civil forfeiture action were settled simultaneously. Under the agreement in the civil forfeiture action, Mr. Alexander and his wife will forfeit over $46 million. Those funds will be returned to the company and used to resolve the civil actions against it arising out of the backdating claims.
The Commission’s action was resolved with a consent to the entry of a permanent injunction prohibiting future violations of Securities Act Action 17(a) and Exchange Act Sections 10(b), 13(b)(5), 14(a) and 16(a). In addition, Mr. Alexander agreed to pay $26,206,298 in disgorgement and $21,442,157 in prejudgment interest along with a $6 million civil penalty. Mr. Alexander will also be permanently barred from serving as an officer or director of a public company. His disgorgement and prejudgment interest obligations are deemed satisfied by the entry of the order in the civil forfeiture action. The other defendants settled with the Commission earlier.