Comverse technology stock option backdating
The auditors who failed to notice or to stop these potential violations may be equally culpable.A number of chief executives already have been forced out or have resigned over the backdating issue.
By failing to include these options in their books, companies may be overstating their profits – and may, ultimately, have to restate their financials.Some observers have said this is just the tip of the iceberg.In a December 28, 2009 press release (here), the plaintiffs’ lawyers announced the settlement of the Comverse Technology options backdating-related derivative lawsuit.Plaintiffs' law firms have already filed a number of securities class actions and derivative lawsuits on the backdating issue."It’s pretty sad to see that so many executives, after convincing their shareholders to approve stock incentive plans, thought they could get away with rewriting the terms," said Peter Pease, a partner at Berman De Valerio."That’s just plain theft, and it makes the incentive plans meaningless."The Journal, for example, analyzed the stock options grants of Jeffrey Rich, CEO of Affiliated Computer Services.As reflected in the company’s December 18, 2009 filing of Form 8-K (here), Alexander is to pay the $60 million into the derivative settlement fund and then the amounts are to be transferred to the class action settlement fund.
Alexander, as readers will no doubt recall fled to Namibia to evade options backdating charges, where he remains a fugitive.
This derivative lawsuit settlement is separate from, but related to, the previously announced $225 million settlement of the Comverse Technology options backdating-related securities class action lawsuit (about which refer here).
The bulk of the derivative lawsuit settlement consists of the previously disclosed agreement of Comverse’s former CEO Kobi Alexander to pay Comverse $60 million to be applied to the class action lawsuit settlement.
He also agreed to relinquish his counterclaims against Comverse seeking $2.2 million in damages relating to deferred compensation, lost wages and cancelled or revoked options and restricted stock.
The company’s former CFO, David Kreinberg, agreed to pay $75,000 for the benefit of Comverse, in addition to the $2.39 million he previously paid to the SEC.
Company stock option plans are on file with the SEC, with a description of how the strike prices are calculated.