BROOKLYN N.Y. – Jacob Alexander, also known as “Kobi Alexander,” an Israeli national, was sentenced earlier today to 30 months in prison after having pleaded guilty to securities fraud for his role in a stock options backdating scheme involving Comverse Technologies Inc. (Comverse). Alexander was a former Chief Executive Officer and Chairman of the Board of Directors of Comverse, which was traded on the NASDAQ stock market. Comverse was a component stock of the S&P 500 and the NASDAQ 100 at the time of the offense. Last year, Alexander was extradited from Namibia after having been indicted in the Eastern District of New York more than ten years ago. Today’s sentence represents the longest term of incarceration imposed by a court in connection with an options backdating scheme.
The sentencing was announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).In addition, Mr. Capers thanked the Securities and Exchange Commission (SEC) and the Department of Justice’s Office of International Affairs (OIA) for their cooperation and assistance in the prosecution.
“Today’s sentence should send a powerful message to high ranking executives that corporate rank is no shield to criminal liability. CEOs and other members of the C-suite who commit crimes will be held to account to the full extent of the law. For more than ten years, law enforcement pursued Kobi Alexander, and now he has finally been punished for his role in a securities fraud scheme,” stated United States Attorney Capers. “We will continue to follow the evidence in all of our cases, wherever it may lead, and protect the investing public.”
“Kobi Alexander challenged the reach of law enforcement, not once, but twice. First by committing the crime he’s accused of, and a second time by leaving the country when he became aware his actions had caught up to him. This case serves as a reminder of our commitment to seeing justice served. You might try to escape your crime, but we won’t let you get away that easily,” stated FBI Assistant Director-in-Charge Sweeney.
According to documents filed in this case, Comverse was a communications software company with offices in Woodbury, New York. Between 1998 and 2006, the defendant and his coconspirators engaged in a fraudulent backdating scheme using hindsight to select the issuance date of Comverse stock options, which they awarded to themselves and Comverse employees, and then lied about this practice to investors in public filings and elsewhere. In doing so, the defendant and his coconspirators were able to select issuance dates when Comverse stock was trading lower, thereby awarding themselves and Comverse employees “in-the-money” options without properly accounting for these options in Comverse’s financial disclosures to investors. By backdating options, the defendant and his coconspirators violated accounting rules and caused Comverse to overstate its profits. Additionally, the backdated options also violated the terms of Comverse’s stock option plans that were approved by its shareholders. As the top recipient of stock options in every company-wide grant, the defendant gained approximately $30 million in paper profits from the scheme. Ultimately, the defendant agreed to pay $60 million in forfeiture and civil settlements, which was applied as restitution to compensate Comverse and its shareholders.
When the defendant’s conduct came to light, he attempted to obstruct justice by offering to bribe a witness to make false statements to federal investigators. Shortly before being charged in connection with his scheme, and after he was aware of the government’s investigation, the defendant moved to Namibia, where he relocated with his family. The government promptly sought the defendant’s extradition.
Today's proceeding took place before United States District Judge Nicholas G. Garaufis.
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The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorney James P. Loonam is in charge of the prosecution and led the Office’s efforts to secure Alexander’s extradition from Namibia, with assistance from theDepartment of Justice’s Office of International Affairs.
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The Defendant:
JACOB ALEXANDER, also known as “Kobi Alexander”
Age: 64
E.D.N.Y. Docket No. 06-CR-628 (NGG)