Ex-Comverse CEO pleads guilty to fraud, a decade after fleeing to Africa

August 24, 2016 3:21 PM EDT

Fugitive U.S. millionaire Jacob "Kobi" Alexander sits with his wife Hanna, as he awaits the start of his extradition hearing in Windhoek, September 17, 2008. REUTERS/Stringer /File Photo

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By Nate Raymond

NEW YORK (Reuters) - The former chief executive officer of Comverse Technology Inc pleaded guilty to securities fraud on Wednesday and was ordered detained a decade after fleeing the United States for Namibia to avoid prosecution.

Jacob "Kobi" Alexander, the Woodbury, New York-based software developer's founder, entered the plea in federal court in Brooklyn, after ending his fight to avoid extradition.

Following his plea, the 64-year-old Israeli citizen's lawyers sought his release on a $25 million bond pending his Dec. 16 sentencing. But U.S. District Judge Nicholas Garaufis ordered Alexander detained, calling him a flight risk.

"His intelligence and his guile are a clear indication that he can't be trusted," Garaufis said.

Benjamin Brafman, Alexander's lawyer, said he was "bitterly disappointed." It was unclear if Alexander would appeal.

The case was one of the last open U.S. prosecutions arising from government or internal investigations of stock options backdating at over 200 companies, including Comverse, which was acquired in 2013 by former unit Verint Systems Inc (NASDAQ: VRNT).

In backdating, a company retroactively grants stock options on dates when stock prices are lower, making them more valuable. Concealing the practice through improper accounting is illegal, and can inflate earnings.

In court, Alexander admitted he and other executives from 1998 to 2001 used "hindsight" to select the effective dates for granting options for employees, resulting in misleading statements to investors.

"I deeply regret having participated in this conduct," said Alexander, who faces up to 10 years in prison.

Alexander fled to Namibia with his family in July 2006 amid the investigation, prosecutors said. Charges were announced that August against himself, William Sorin, Comverse's general counsel, and David Kreinberg, its finance chief.

Extradition proceedings were still pending when Alexander reached a deal in May to return to the United States to plead guilty to the single count. He had faced 35 counts.

In court, Brafman said Alexander returned "so he would have this nightmare behind him." Alexander's effective exile forced him to attended his parents' funerals by Skype, he said.

Sorin pleaded guilty and was sentenced to one year in prison. Kreinberg was spared prison after pleading guilty.

While abroad, Alexander agreed in 2009 to pay $60 million to Comverse in connection with shareholder litigation, and to waive over $72 million in claims he had against Comverse.

He settled related civil government lawsuits in 2010, resulting in a $6 million penalty by the U.S. Securities and Exchange Commission.

The case is U.S. v. Alexander, U.S. District Court, Eastern District of New York, No. 06-cr-00628.

(Reporting by Nate Raymond in New York; editing by Alan Crosby and Tom Brown)

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