Comverse Faces U.S. Criminal Probe [WSJ]
Options-Granting Practices Draw Increasing Scrutiny; Subpoena Covers '95 to '06 [WSJ]
By CHARLES FORELLE and JAMES BANDLER
May 5, 2006; Page A3
Federal prosecutors have begun a criminal investigation of stock-option-granting practices at Comverse Technology Inc., indicating a widening of the continuing probe into potential backdating of options at Comverse and other companies.
Comverse said in a securities filing that it had received a subpoena Tuesday from the U.S. attorney's office for the Eastern District of New York. Several other companies have said their options-granting practices are under scrutiny by the Securities and Exchange Commission.
At issue are stock-option grants to top executives that were routinely dated just ahead of large run-ups in the company share price, and often at or near the bottom of steep dips. The dates correspond to low exercise prices on the options, meaning the executives reap greater profits if shares rise.
MORE
• Read more about stock-options grants made to UnitedHealth, Comverse and other companies' executives in The Perfect Payday (March 18) and see charts of the option grants.
• Comverse CEO Quits Amid Probe
05/02/06
Kobi Alexander, Comverse's founder, was the recipient of a number of such option grants during his tenure as chief executive of the telecommunications-software vendor. Earlier this week, Mr. Alexander and two other top Comverse officials resigned. Seven grants to Mr. Alexander between 1994 and 2001 preceded double-digit run-ups in the company's share price over the next 20 trading days. The pattern raises the question of whether the grants were approved at a different time but backdated to take advantage of the stock movement.
Last month, the New York company said some option-grant dates used in its accounting "differed" from the actual grant dates, and that it would restate more than five years of financial results. It isn't known whether Mr. Alexander is under investigation.
Neither Mr. Alexander nor his lawyer could be reached. A Comverse spokesman didn't return a call seeking comment. Comverse was one of a half-dozen companies whose past options-granting practices were questioned in a March article in The Wall Street Journal.
Options backdating, if it occurred, could present several legal problems for companies and executives, in addition to tax and accounting problems. Executives report option grants on forms with the SEC, and filing false reports carries a criminal penalty. They could also be subject to fraud charges for manipulating records to enrich themselves.
It wasn't immediately clear what has caught the prosecutors' attention. In its securities filing, Comverse said the subpoena related to option grants from 1995 to the present. |
