By Charles Forelle and Christopher M. Matthews
Jacob "Kobi' Alexander, a fugitive technology executive who has
spent a decade hiding in Africa from criminal charges in a
stock-options backdating scandal, is returning to the U.S. to plead
guilty in Brooklyn federal court.
Mr. Alexander was chief executive of Comverse Technology Inc., a
New York company that made voice mail systems. As with that of many
tech and telecom companies, Comverse's stock rocketed upward in
volatile trading during the 1990s and early 2000s.
Prosecutors allege Mr. Alexander, along with Comverse's general
counsel and its finance chief, for years would look for low-price
trading days in the past on which to pretend they and other
employees had been awarded stock options at that day's price. Since
an option grants its holder the right to buy shares at a fixed
price, the alleged manipulation scored them instant gains. The
backdating added millions to Mr. Alexander's compensation.
Mr. Alexander is scheduled to appear in court on Wednesday and
plead guilty to one count of securities fraud "relating solely to
backdating," according to Benjamin Brafman, one of his lawyers. His
lawyers have asked for him to be released on a $25 million bond,
cosigned by his wife and his sister.
A spokeswoman for the Brooklyn U.S. attorney's office declined
to comment. In a letter to the judge overseeing the case unsealed
on Tuesday, the prosecutor said the parties have agreed to resolve
the case and that Mr. Alexander would plead guilty to the one
count. The letter said the Justice Department would oppose
bail.
A Wall Street Journal article on stock-option backdating in
March 2006, based on statistical analysis of option-grant patterns
at several companies, characterized Mr. Alexander 's grants as
wildly improbable. The sharp share-price gains shortly after his
purported grant dates couldn't realistically be explained by
chance.
Mr. Alexander and two other top executives, David Kreinberg and
William Sorin, resigned several weeks later. Over that summer, the
Federal Bureau of Investigation sought their arrest. Messrs.
Kreinberg and Sorin turned themselves in. Mr. Alexander was nowhere
to be found.
He had traveled to Israel, his lawyer at the time had said, and
then made his way with his family to Windhoek, the hilly capital of
Namibia, a western African nation that has a cinematic red-sand
coastal desert and no formal extradition treaty with the U.S.
Back in Brooklyn, a grand jury handed down a 35-count indictment
charging him with, among other things, securities fraud, wire fraud
and money laundering -- for spiriting $57 million out of the U.S.
while under investigation that summer.
The indictment also alleged that around a week after the
Journal's call inquiring about the grants, Mr. Alexander attempted
to bribe another person, later revealed to be Mr. Kreinberg, to
take the fall. He offered $2 million, prosecutors said, and then
went up to $5 million.
U.S. officials tried to get Mr. Alexander back from Namibia.
They persuaded Namibia's president to issue a proclamation
declaring the U.S. a place to which the country's courts could
extradite. Mr. Alexander spent a few days in a Namibian jail, then
was released on bail.
He settled down in Namibia, investing in local businesses,
including an auto-body shop called Monarch Panelbeaters, and
finding local business partners, including a former Namibian
military officer. Mr. Alexander and his wife bought a house near a
golf course, funded a scholarship for Namibian students, donated to
Windhoek's only synagogue and invested in a low-income housing
project.
Meanwhile, the extradition stalled for 10 years in Namibian
courts. In their letter on Monday, Mr. Alexander's lawyers Mr.
Brafman and Jeremy Temkin wrote: "It is safe to say that there was
no end in sight to the Namibian judicial proceedings."
The industrywide backdating scandal a decade ago took its toll
on American corporations. Scores of executives and directors, many
of them in the tech industry, lost their jobs, and several were
criminally prosecuted.
One executive, William McGuire, the CEO of insurer UnitedHealth
Group Inc., resigned and agreed to forfeit $620 million in options
gains and retirement pay to settle civil claims and a complaint by
the Securities and Exchange Commission. He neither admitted nor
denied the SEC's charges.
If Mr. Alexander is convicted, the maximum sentence would be 25
years in prison, but Mr. Alexander's lawyers said in their letter
that sentences in similar backdating cases have been far
shorter.
According to the lawyers, of the 29 executives charged with
backdating since 2006, 16 have pleaded guilty and received an
average sentence of less than 2.5 months in prison. The longest
sentence of that group was 15 months, Mr. Alexander's lawyers
said.
Mr. Kreinberg, his erstwhile CFO, pleaded guilty and served one
day in custody after pleading guilty. Mr. Sorin, the general
counsel, also pleaded guilty and was sentenced to one year and one
day.
While in Namibia, Mr. Alexander kept talking with American
authorities. In 2010, he settled civil actions with federal
prosecutors and the SEC, agreeing to pay $53 million. He sold three
apartments at the Park Imperial, at West 56th Street and Broadway,
for $35.2 million to help pay the tab.
Write to Charles Forelle at charles.forelle@wsj.com and
Christopher M. Matthews at christopher.matthews@wsj.com
(END) Dow Jones Newswires
August 23, 2016 14:01 ET (18:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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