Former Comverse CFO pleads guilty to fraud in stock option case
A former executive with leading voicemail-software maker Comverse Technology Inc. pleaded guilty to conspiracy and securities fraud Tuesday after agreeing to cooperate in the investigation of a scheme to make millions of dollars by manipulating stock options.
Former head of finance David Kreinberg told a federal judge in Brooklyn that he conspired with former Chief Executive Jacob “Kobi” Alexander to backdate the options and falsify financial statements to conceal the fraud from shareholders.
“Your honor, I knew at the time that my actions and agreements with others at the company ... were wrong,” he said.
He faces up to 15 years in prison at sentencing Feb. 23. He also could be ordered to pay tens of millions of dollars in restitution. Kreinberg, 41, and former senior general counsel William Sorin surrendered in August and were released on $1 million bond each. Alexander, meanwhile, became the target of an international manhunt.
Before he disappeared, Alexander, 54, an Israeli citizen and a U.S. permanent resident, allegedly transferred $57 million to Israel. He was located last month in Namibia in southwest Africa, where he was detained before being freed on bail pending a ruling on an extradition request.
Prosecutors allege Alexander, Kreinberg and Sorin made options more lucrative by backdating them to dates that corresponded with low points in the stock’s value. Usually, a stock option’s exercise price coincides with the market value at the time of a grant to give the recipient incentive to drive the price higher.
“The company was in fact issuing backdated options with an exercise price lower than the fair market value on the grant date,” Kreinberg said during his plea. “After learning this, I agreed with the CEO and others at the company to assist them in continuing the practice.”
From 1991 through 2005, Alexander exercised options and sold stock worth about $150 million, making a profit of $138 million, according to the criminal complaint. Of that, $6.4 million was generated by backdating options, it said. Prosecutors said Kreinberg and Sorin earned about $1 million each on backdated options.