RealTime IT News

Comverse Fires Former Execs Over Options Scandal

Comverse Technology  has fired three of its top executives a week after they were charged with conspiracy to commit securities fraud, mail fraud and wire fraud.

The New York-based multimedia software maker said in a statement that it sent termination notices to former CEO and board chairman Kobi Alexander, former Executive Vice President and CFO David Kreinberg and former director and General Counsel William Sorin.

The men had already resigned from Comverse in May before the charges by the Department of Justice that they had pocketed millions in profits through a backdating scheme while issuing false and misleading financial statements to stockholders about the real value of the options.

However, until now, they were acting as consultants for the company they led.

The board Thursday formally severed ties with the three men, revoking all vested and unvested unexercised options and restricted stock options.

Moreover, the company is not granting severance pay to Alexander, Kreinberg or Sorin, and said it would pursue legal action against them.

Alexander, Kreinberg and Sorin were charged in federal court in Brooklyn, N.Y. last week. Alexander did not appear in court and is considered a fugitive from justice.

In a related action to the Department of Justice (DoJ) charges, the Securities and Exchange Commission (SEC) filed a civil fraud case against the three men for filing false annual and quarterly financial reports and proxy statements from 1991-2005.

Stock option backdating is a emerging as a widespread scandal with considerable financial repercussions for companies and executives.

In option backdating, shares are granted at prices below the market price on the day of the grant, virtually ensuring the recipient of a better price for their shares down the line.

The practice harks back to the late 1990s, when the dot-com fever was at an all-time high and options were granted freely to lure top talent to companies seeking competitive advantage.

To date, more than 80 companies have fallen under the scrutiny of the Securities and Exchange Commission for backdating or other curious stock-related practices.

Alexander, Kreinberg and Sorin are the second set of executives to be charged with securities fraud pertaining to finagling the dates on stock option grants.

Former Brocade Communication Systems  executives CEO Gregory Reyes Jr. and Vice President of Human Resources Stephanie Jensen were charged with stock fraud in July.