A Global Manhunt for Stock Option Fugitive
In the unfolding stock option scandal, few characters are more curious than an Israeli entrepreneur named Jacob “Kobi” Alexander.
The 54-year-old former chief executive, who nurtured Comverse Technology Inc. from a high-tech-wannabe penny stock to a leading producer of voicemail software with 5,000 employees, fled the country this month rather than face charges of scheming to manipulate his company’s stock options.
Israeli newspapers reported Thursday that a private investigator had sighted Alexander in a fishing village in Sri Lanka. U.S. authorities had little to say about the reports, except that they are continuing their efforts to hook him.
“Bottom line: We have no confirmation of his whereabouts,” said Robert Nardoza, a spokesman for the U.S. attorney’s office in Brooklyn. “The investigation is ongoing.”
The hunt for Alexander, abetted by an Interpol Red Notice sent to police agencies around the world, grew out of the government’s widening investigation into stock option manipulation -- “the newest trend in investor fleecing,” in the words of Chip Burrus, assistant director of the FBI’s criminal investigative unit.
Options give their holders the right to buy stock for a certain price within a certain time limit. Typically, that price is the same as the price on the day the option was granted. But at Comverse and dozens of other companies under scrutiny, insiders appear to have selected earlier dates with lower stock prices, which could boost their profits.
New York-based Comverse is only the second company whose former executives have been charged with criminal fraud, although Justice Department investigators are looking into at least 45 cases of possible option manipulation. The Securities and Exchange Commission is reviewing dozens more cases for possible civil violations.
On Aug. 9, federal officials in New York charged Alexander, former Chief Financial Officer David Kreinberg and former General Counsel William F. Sorin in connection with an alleged option conspiracy dating back to 1991. The three executives resigned in May.
Prosecutors say their misdeeds extended far beyond the backdating of options. The three former executives are alleged to have deceived their own directors by awarding options to phantom employees, then shifting those awards to a slush fund to reward favored workers.
“I don’t want to say anything about him,” Robert G. Morvillo, Alexander’s attorney, said recently. Morvillo added that he hadn’t spoken with his client in “several weeks.”
Overall, Alexander exercised $138 million of his stock options and gained at least $6.4 million in profit as the result of improper backdating, according to the Justice Department.
As investigators were closing in this summer, Alexander wired $57 million to Israel, where his family kept a second home.
The decision to evade U.S. authorities could be used as evidence of criminal intent, said Peter J. Henning, professor of law at Wayne State University and a specialist in white-collar crime.
“It puts him in a tough position to say he didn’t do anything wrong but he felt the need to go to Israel in the middle of a war,” said Henning, who has worked at the Justice Department and the SEC.
Alexander’s reputation as a hands-on executive also could complicate his defense.
“Several employees have informed me that Alexander carefully reviewed the draft [regulatory] filings, flagging typographical and other errors,” an investigator wrote in the government’s complaint. “According to one employee, Alexander bragged about his meticulous review, saying, ‘How many CEOs do you know who read every word of the footnotes?’ ”
Such attention to detail could make it harder for Alexander to mount a classic chief-executive defense -- that he was not fully aware of the mischief taking place around him.
“That defense can’t work if you’ve got somebody boasting that he reads the footnotes in financial statements,” Henning said.
Alexander was born in Israel, the son of Zvi Alexander, who is considered the founder of that nation’s small-scale oil industry. The younger Alexander served in the Israeli military and intelligence services and has frequently traveled between Israel and the United States.
He holds a degree in economics from Hebrew University in Jerusalem and a graduate degree in finance from New York University, where he studied at night while working days as an investment banker with what is now Lehman Bros. Holdings Inc. He returned to Israel in the early 1980s to pursue his entrepreneurial ambitions, working on the predecessor to Comverse.
By 1984, Alexander was back in the United States, helping launch Comverse on Long Island near New York City. The name was meant to convey “communication” and “versatility.”
The start-up took off in the 1990s, eventually selling its high-tech wares in more than 120 countries and seizing niche opportunities such as digital eavesdropping for law enforcement. In 2000, Chief Executive magazine named Alexander the nation’s top CEO, and the company’s annual revenue now exceeds $1 billion.
“He was the king of the world, and now he’s a fugitive,” said Shirley Yom-Tov, an editor of the Marker, a financial website owned by the Israeli newspaper Haaretz. “He’s one of the great high-tech entrepreneurs who ever came out of Israel.”
Alexander holds dual U.S. and Israeli citizenship, according to the FBI, and has maintained financial ties to his native country. His investments have included stakes in Tel Aviv’s Maccabi basketball team and IBI Group, an investment firm active in initial public offerings in Israel. He also has a summer home in the ancient Israeli enclave of Caesaria on the Mediterranean Sea.
On Thursday, the Israeli newspaper Maariv wrote that private investigator Moshe Buller had reportedly tracked Alexander to the Indian Ocean island nation of Sri Lanka by tracing a call the beleaguered entrepreneur had made over the Internet.
Buller told Bloomberg News he was hired by a New York venture capital firm, which he declined to identify. He did not respond to requests from The Times for an interview.
Israeli authorities have not commented on the case. But much of the public there remains fascinated with the tale of the local hero turned fugitive.
“It’s a really big story in Israel,” said journalist Yom-Tov. “It’s an amazing story.”
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Begin text of infobox
Jacob ‘Kobi’ Alexander
Age: 54
Hometown: Tel Aviv, Israel
Background: Founder and former chief executive of Comverse Technology
Education: Bachelor’s degree in economics from Hebrew University of Jerusalem; master’s in finance from New York University
Citizenship: United States, Israel
2005 compensation: $4,573,810 in salary and Comverse stock awards
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Graphics reporting by Scott Wilson
Los Angeles Times
