Comverse technology backdating scandal
Very soon an internal investigation was initiated by forming a special committee and hiring the outside law firm Dickstein Shapiro in New York as against the usual firm that they used Weil, Gotshal & Manges raising some more pertinent questions regarding the involvement of senior General counsel William Sorin. Soon federal investigating agencies started following up on the story and in early August of 2006 3 top executives of Comverse Inc were charged with backdating stock options fraud in the company.According to federal prosecutors, Kreinberg and Alexander used fictitious names to generate stock options and then created a “secret slush fund” to evade the company’s written plan on issuing them.
Hence backdating is unethical and clearly illegal atleast in the Comverse backdating scandal.Scandals from stock frauds to backdating scandals rule in stock markets and the lure of the lucre really tells in the stock market.One of the types of scandals to hit the stock markets and which did not receive much attention until lately is that of backdating stock options.Alexander then personally doled out the options, with Kreinberg’s advice and consent, to the employees he favored.Compounding the scheme were the misleading statements made about the options in the company’s public filings, including its proxy statements and annual reports.According to his lawyers “Backdating options is not illegal.
Alexander relied on lawyers and accountants to draft Comverse’s disclosures and to prepare its financial statements,” Alexander’s lawyers noted that “The charges relate to the disclosure and accounting treatment of the options,”.
The stock options are provided at a lesser price and it is dated earlier to show compatibility between the price and the date without having to account for it to investors and other stock holders thus misleading them and giving others an unfair advantage Former CEO of Comverse Inc Jacob Alexander of Comverse maintains that backdating of stock options is not illegal.
He also explains that he relied on the advice of experts such as lawyers and accountants regarding his former company’s options awards, according to his lawyers.
Backdating itself was rife in the Silicon Valley and went unnoticed until a student doing statistical studies figured out that backdating with illegal accounting was occurring in many of the technology firms earning many an illegal profit stealthily.
When he got in touch with the Wall Street Journal they followed up the story and the backdating scandal storm started brewing and one of its first casualties was Comverse Technology Inc. B.(2006)) Comverse Technology Inc is the world’s leading provider of software and systems enabling network-based multimedia enhanced communication and billing services.
Options backdating is simply granting an employee stock options that is dated prior to the date that the company actually granted the option.