Kobi Alexander may have altered the exercise dates on his options and committed tax fraud. It will be interesting to see if the Republic of Namibia extradites him.
Report: Alexander may have fudged option exercise dates
Wall Street Journal: Although ex-Comverse CEO Kobi Alexander may have backdated options in 1998, he might have just been lucky.
Gil Shlomo 6 Dec 06 15:49
The “Wall Street Journal” reports today that Comverse Technology Inc. (Nasdaq: CMVT) founder and former CEO Kobi Alexander may have fudged option exercise dates, in addition to allegedly backdating his options grants to make illegal profits.
The “Wall Street Journal” cites an exercise of options by Alexander in 1998. If backdating occurred in this instance, then Alexander evaded paying taxes to the IRS on his earnings. The newspaper relies on a report by Gradient Analytics Inc. about the 1998 exercise, which Gradient sent to its clients, including hedge funds and mutual fund money managers.
In the report, Gradient did not conclude that Alexander backdated options in the 1998 case, and said that his timing might have been a matter of luck. Alexander’s attorney, Adv. Robert Morvillo, declined to comment.
The “Wall Street Journal” says, “The IRS considers the spread between the option’s strike price and the share’s market value on the exercise date to be subject to tax as ordinary income. Because most executives exercise their options and sell the shares simultaneously, all of the gain is often taxed in this way. But when shares aren’t sold at the same time as the option is exercised, the difference between the market value of the shares on the date of exercise and any price when the shares are subsequently sold is taxed at the lower capital gains rate.”
The paper notes, “At the time of the 1998 exercises by Alexander, the top capital gains tax rates was 20%, while the top rate on ordinary income was 39.6%.”
Published by Globes [online], Israel business news - www.globes.co.il - on December 6, 2006
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