Comverse Technologies Says Former Managers Falsified Financial Reports - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Comverse Technologies Says Former Managers Falsified Financial Reports

The board accuses former managers of "stock option backdating" and "earnings management."

The new management of Comverse Technology, a networking and communications company, has accused former executives of inflating earnings and backdating options in 8-K Securities and Exchange Commission filings this week.

The SEC filings focus on behavior by former chief executive Jacob "Kobi" Alexander and give a rare view into corporate malfeasance. Alexander is a fugitive from U.S. law in Namibia, where he has been fighting extradition to face charges filed by the U.S. Attorney's Office in Brooklyn, N.Y.

Still defiant, Alexander last week filed a lawsuit against his old company, seeking severance pay in addition to other compensation that totals $72 million. He has continued to maintain his innocence of the charges against him.

The 8-K report by a special committee of the Comverse board of directors describes investigations of "stock option backdating" and another on "earnings management."

Between 1991 and 2001, the 8-K filing stated, Alexander and Comverse general counsel William Sorin, and sometimes CFO David Kreinberg, were involved in backdating stock options for more than 5,000 grantees.

"The recipients of such grants ranged from low-level employees to senior executives," the report stated. It noted that other employees and executives had no knowledge of the options manipulation. The filing also said that Alexander and Kreinberg had established "a special reserve fund comprised of options with favorable exercise prices from which options were granted in order to address special employment and recruiting needs."

The fund included fictitious employees, and dummy accounts were also utilized in the scheme, the filing said.

The Comverse internal investigations also found that financial results "were intentionally misstated as a way of aligning the company's performance with Wall Street expectations" from at least 1996 through 2003.

Comverse chairman Mark C. Terrell, in a statement, praised the investigations as an important first step "in putting the issues addressed by the investigations behind us. These measures are designed to enhance corporate governance, internal controls, training, and compliance."

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2021 Outlook: Tackling Cloud Transformation Choices
Joao-Pierre S. Ruth, Senior Writer,  1/4/2021
Enterprise IT Leaders Face Two Paths to AI
Jessica Davis, Senior Editor, Enterprise Apps,  12/23/2020
10 IT Trends to Watch for in 2021
Cynthia Harvey, Freelance Journalist, InformationWeek,  12/22/2020
White Papers
Register for InformationWeek Newsletters
The State of Cloud Computing - Fall 2020
The State of Cloud Computing - Fall 2020
Download this report to compare how cloud usage and spending patterns have changed in 2020, and how respondents think they'll evolve over the next two years.
Current Issue
2021 Top Enterprise IT Trends
We've identified the key trends that are poised to impact the IT landscape in 2021. Find out why they're important and how they will affect you.
Flash Poll