Comverse Cuts Ties to Ex-CEO in Option Affair
Comverse Technology Inc. terminated all employment agreements with Jacob “Kobi” Alexander, its former chairman and chief executive, and two other former executives after they were charged last week in a government crackdown on stock-option manipulation.
The New York-based voicemail-technology company said in a statement Thursday that it also revoked all stock-based compensation to Alexander; David Kreinberg, a former chief financial officer; and William Sorin, a former director and general counsel.
In other developments in the widening stock-option affair, McAfee Inc. said an internal probe had uncovered improper option-grant accounting and would probably lead the maker of anti-virus software to restate three years of financial results. Other technology companies are conducting similar probes.
The dates listed for certain options that McAfee granted to employees differed from actual dates the grants were made, the Santa Clara, Calif.-based company said in a filing Wednesday with the Securities and Exchange Commission. The probable restatements for the three years ended 2005 are likely to have a material effect on earnings, the company said.
The SEC began a formal probe of McAfee in June, and the company warned of a possible restatement July 27, when it reported second-quarter results.
“It’s no mystery to investors that McAfee’s management team is unpredictable,” Piper Jaffray Cos. analyst Gene Munster said Thursday. “Issues around backdating options are not a surprise.”
Munster, who rates McAfee “outperform,” said he didn’t own shares.
The review by McAfee’s special committee of independent directors hasn’t been completed, the company said. Spokeswoman Siobhan Macdermott declined to comment further.
Amkor Technology Inc. also said this week that it would restate more than eight years of results, and BEA Systems Inc. announced an internal review of option practices. Cablevision Systems Corp. disclosed a probe by the SEC after a review showed backdating of options.
More than 108 companies have revealed inquiries into whether they improperly backdated grants. Many have delayed quarterly results and at least 19 people have lost their jobs. The FBI on Tuesday described former Comverse CEO Alexander as a fugitive being sought in connection with a multimillion-dollar option scheme.
“The general awareness of the cost of options is higher than it was, and it’s making people take a harder look,” said Charles Di Bona, an analyst with Sanford C. Bernstein & Co. “It’s healthy to do this” to “get a better handle of how options affect the economics of these businesses.”
Intuit Inc., the Mountain View, Calif.-based maker of TurboTax software, said this week that a probe had found no fraud and that restatements weren’t planned.
Earnings at Amkor, a semiconductor equipment firm, will be revised for fiscal years 1998 through 2005 and for the first quarter of fiscal 2006, the West Chester, Pa.-based company said, adding that it hadn’t been contacted by legal authorities in the matter.
BEA Systems, whose software helps Internet-based programs exchange information, said in a statement that independent legal counsel would aid its internal review of stock options. Accounting for earlier periods may be revised, the San Jose-based company said.
Tetra Tech Inc., an engineering and technical contractor based in Pasadena, will take a one-time charge of $2.3 million for continuing operations and $900,000 for discontinued operations for stock options granted prior to fiscal 2004.
PMC-Sierra Inc., a maker of silicon chips for telecommunication devices, completed an internal option probe and reiterated that it found no deliberate misconduct. Santa Clara-based PMC filed its second-quarter report and said it reflected a balance sheet restatement to adjust stockholders’ equity as of Dec. 31, 2002.
Stock options allow holders to buy shares at a later date, usually at the trading price the day they were granted. In backdating, companies peg options to days with low stock prices, increasing the likelihood and size of a profit for recipients.
If not disclosed and recorded as an expense, the practice may be fraudulent because it hides costs from shareholders and regulators.
