The Securities and Exchange Commission has filed civil charges against three former senior executives of softaware maker Comverse Technology, Inc. (Comverse), alleging that they engaged in a fraudulent scheme to backdate stock option grants to coincide with historically low closing prices of the company's common stock.
The SEC also alleges that two of the executives, Comverse's founder and former chairman and chief executive Jacob "Kobi" Alexander, and David Kreinberg, Comverse's former chief financial officer, created a slush fund of backdated options by causing options to be granted to fictitious employees and, later, used these options to recruit and retain key personnel.
The SEC also filed civil charges against William F. Sorin, Comverse's former senior general counsel.
The complaint alleges that the former executives collectively realized millions of dollars of ill-gotten compensation through the exercise of backdated option grants and the subsequent sale of Comverse common stock.
In a separate matter, the United States Attorney's Office for the Eastern District of New York unsealed a criminal complaint charging Alexander, Kreinberg, and Sorin with conspiracy to violate the antifraud provisions of the federal securities laws, wire fraud, and mail fraud by engaging in the same scheme.
The SEC's complaint charges Alexander, Kreinberg, and Sorin with violations of the antifraud, books and records, internal controls, misrepresentations to auditors, and ownership reporting provisions of the federal securities laws. Alexander and Kreinberg are separately charged with violations of the Sarbanes-Oxley officer certification provisions of the federal securities laws.
The SEC's action comes just a few weeks after the agency and federal prosecutors filed complaints alleging the former chief executive and former vice president of human resources at Brocade Communications Systems, Inc., routinely backdated stock option grants to give employees favorably priced options without recording necessary compensation expenses.