Ex-Comverse CEO to Return to U.S. for Plea After a Decade

Updated on
  • Alexander lived in Namibia after 2006 securities fraud charges
  • Former Comverse CEO to plead guilty to securities charge

The former chief executive of Comverse Technology Inc. will return to the U.S. this week and plead guilty to backdating stock options after more than a decade fighting extradition from Africa.

Jacob "Kobi" Alexander, 64, is scheduled to appear in Brooklyn federal court Wednesday to admit to one count of securities fraud, according to his lawyers and court filings. Alexander appeared Monday in a court in Namibia and agreed to waive extradition, said one of his attorneys, Jeremy Temkin.

“The plea is the culmination of several years of negotiation,” Temkin said.

Benjamin Brafman, another of Alexander’s attorneys, said, “He wants to resolve his legal issues. We’ve come to an agreement with the government that we think is reasonable and fair. It’s time."

The 2006 case against Alexander and two other officials at the voice-mail software maker came at a time when the Federal Bureau of Investigation was investigating dozens of allegations of stock-options fraud at publicly traded companies. Alexander, who has dual U.S. and Israeli citizenship, originally faced 35 criminal counts including stock-option backdating, conspiracy, fraud and money laundering.

‘Fargo’ Fund

The U.S. alleged that Alexander, William Sorin, the firm’s former general counsel, and David Kreinberg, the ex-finance chief, were part of a plot to backdate stock options. Alexander led the operation for about 15 years beginning in 1998 and launched a secret slush fund that was initially named “I. M. Fanton,” in an apparent reference to "phantom," prosecutors said. The fund was later renamed “Fargo” after the Coen brothers’ movie.

After Alexander failed to appear in court to face charges in August 2006, the U.S. declared him a fugitive. He was arrested in Namibia at the behest of U.S. authorities in September 2006.

Since then, Alexander has been free on bail in the African nation while the U.S. sought his return to New York. In 2007, his lawyers in Namibia asserted that backdating "is not illegal." In 2010 he won an appeal in Namibian courts declaring a part of that country’s Extradition Act was unconstitutional.

Alexander’s co-defendants, Kreinberg and Sorin, both pleaded guilty. Kreinberg was spared prison by a federal judge who credited his cooperation with the U.S., while Sorin was sentenced to a year and a day in prison.

While Alexander, his wife Hanna and three children left the U.S. for Israel in June 2006 as the criminal investigation neared its conclusion, his American lawyers struck a deal for his return that prosecutors later said was a ruse to buy him time and get away.

Secret Flight

Alexander agreed to return to the U.S. on July 28, 2006 on El Al flight No. 1 bound for John F. Kennedy International Airport, prosecutors said. He never arrived and instead, a day earlier, he secretly flew to Germany and then went on to Namibia.

He also attempted to hide assets overseas to pay for his flight, Brooklyn prosecutors said. While in Israel from July 14 to July 18, 2006, Alexander transferred $57 million to his accounts at Bank Leumi Le-Israel Ltd. and Bank Hapoalim Ltd., prosecutors said. His attempt to transfer another $12 million from a U.S. account was halted on July 31, 2006, after he failed to return.

Alexander later challenged the legitimacy of the U.S. charges, arguing in Namibian courts that backdating stock options wasn’t illegal and that he relied on the advice of the firm’s lawyers and accountants.

SEC Settlement

In 2010, Alexander agreed to pay almost $54 million to settle U.S. Securities and Exchange Commission claims that he led the options-backdating scheme. Alexander and his wife also agreed to give up two U.S. bank accounts in a separate civil-forfeiture action filed by federal prosecutors. The accounts held $46 million, federal prosecutors in Brooklyn said.

In a letter to U.S. District Judge Nicholas Garaufis Monday, Alexander’s lawyers said they will ask that he be released on a $25 million personal recognizance bond backed by $10 million in cash while awaiting sentencing.

Alexander has no criminal history, has a lifelong history of philanthropy, a "superb military record" in the Israel Defense Force and "nothing about his personal history or the crime to which he is pleading guilty suggests that he is a danger to the community," his lawyers said in the letter. He moved to Namibia before any charges were filed and didn’t violate any court order requiring him to stay in the U.S., his attorneys said.

Knew Consequences

The lawyers said that prosecutors’ arguments that he might flee before sentencing are belied by the fact that he knew the possible penalties against him when he agreed to return to the U.S. to resolve the case. They asked Garaufis to impose a sentence "substantially below" the 10-year maximum, citing other defendants convicted of similar charges and the "unprecedented contribution" he made to the settlement of civil cases that arose from the options backdating at Comverse.

"Mr. Alexander did not sell any of the allegedly backdated options identified in the indictments filed by the government in this case, and thus he did not profit from the charged backdating," the lawyers said. "Nonetheless, Mr. Alexander contributed approximately $60 million in cash to the civil settlements and agreed to forgo claims to another $70 million in deferred compensation and other benefits to which he was entitled."

The case is U.S. v. Alexander, 06-cr-00628, U.S. District Court, Eastern District of New York (Brooklyn).