Ex-Comverse CEO returning to U.S. to plead guilty in stock fraud

August 22, 2016 9:19 AM 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


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By Nate Raymond and Jonathan Stempel

NEW YORK (Reuters) - Ending a decade on the run, the former chief executive officer of Comverse Technology Inc who fled to Africa to avoid a fraud prosecution over a stock options scandal is returning to the United States to plead guilty.

Jacob "Kobi" Alexander, 64, will admit to one count of backdating stock options in the federal court in Brooklyn on Wednesday, his lawyer, Benjamin Brafman, said in an email on Monday.

The Israeli-born Alexander has been considered a fugitive by the U.S. government, and lived in Namibia since his September 2006 arrest there, following a global manhunt.

After being freed on bail the following month, Alexander had been fighting extradition to the United States, where he faced 35 counts including securities fraud, money laundering and obstruction.

But Alexander now "wants to accept responsibility for his conduct" after reaching a "favorable plea agreement," Brafman said.

Comverse, a Woodbury, New York, software developer, was bought out in 2013 by its former unit, Verint Systems Inc (NASDAQ: VRNT).

The U.S. Department of Justice declined to comment on the plea, which was reported earlier by CNBC television.

Alexander's case is one of the last remaining major criminal cases stemming from the dot-com bubble, and from federal probes into stock options backdating at more than 200 companies.

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.

Alexander and Comverse's general counsel William Sorin and finance chief David Kreinberg were charged in what prosecutors said was a "fraudulent scheme" to reap millions of dollars from backdating between 1998 and 2001.

Prosecutors said Alexander also created a slush fund for options intended for favored employees, known as "Phantom" and later renamed "Fargo."

Sorin pleaded guilty and was sentenced to one year in prison, while Kreinberg was spared prison after his guilty plea.

Alexander has separately resolved U.S. civil lawsuits related to Comverse.

In December 2009, he agreed to pay $60 million to Comverse and waive more than $72 million in severance and other claims in a settlement with shareholders.

The following November, he agreed to pay $53.6 million to settle with the U.S. Securities and Exchange Commission.

Alexander's lawyers said he plans to continue charitable work in Namibia, including operating soup kitchens that, according to local reports, serve hundreds of children each day.

(Additional reporting by T.J. Strydom in Johannesburg; Editing by Lisa Von Ahn and Jeffrey Benkoe)



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