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Cops Catch 'Most Wanted' Ex-CEO

Ray Le Maistre
9/28/2006

Jacob "Kobi" Alexander, the fugitive former CEO of vendor Comverse Technology Inc. (Nasdaq: CMVT), has been struck off the FBI's Most Wanted list after being apprehended by police in Africa.

Since his arrest in Windhoek, Namibia, Alexander has been formally charged with stock option backdating -- an illegal practice that can potentially boost the value of stock options granted to staff -- and operating slush funds, according to the U.S. Department of Justice. He is due to appear in court and face extradition to the U.S. before the end of this week. (See Backdating Blues.)

Alexander quit as CEO of Comverse -- a voicemail, messaging, and billing system specialist with annual revenues of more than $1 billion -- in late April after the company announced an investigation into its stock option grants.

Alexander was joined at the exit door by former CFO David Kreinberg and former General Counsel William F. Sorin. (See Comverse CEO, CFO Resign.)

The former CEO was formally charged with fraud in August by federal prosecutors in New York, and is estimated to have benefited, on paper, by millions of dollars from the backdating of options. Kreinberg and Sorin stayed in the U.S. to face the music, and were released on $1 million bail each after pleading not guilty. But Alexander went on the run.

According to the indictment unveiled after his arrest, Alexander had, allegedly, been involved in fraudulent activity at Comverse since 1998. In a public statement, the DOJ says he is "charged with conspiracy, two counts of securities fraud, eight counts of making false filings with the Securities and Exchange Commission, four counts of mail fraud, 14 counts of wire fraud, and three counts of money laundering. The indictment also seeks forfeiture of approximately $138 million in Alexander's assets."

The DOJ notes, though, that the charges are "merely allegations, and the defendant is presumed innocent unless and until proven guilty." But if he is found guilty of securities fraud, it adds, then the former CEO faces up to 25 years behind bars.

Alexander's attorney is Robert Morvillo, who defended Martha Stewart in 2004's celebrity trial of the year. (See Stewart convicted on all charges).

The new Comverse board, meanwhile, faces an uphill struggle to manage a company in the throes of growing pains following an acquisition spree that has hoisted it into the IP Multimedia Subsystem (IMS) market and further into the billing sectors. In the past year it has bought: the former Kenan billing business from CSG Systems International Inc. (Nasdaq: CSGS); VOIP systems specialist NetCentrex; and CRM and billing specialist Netonomy . (See Comverse Nabs NetCentrex for $164M, Convergence Drives Billing M&A, and Comverse Acquires Netonomy.)

The company also faces delisting from the Nasdaq , as, because of its ongoing stock option probe, the company has not filed any quarterly reports this year, or its annual report for the fiscal year to January 31, 2006. (See Comverse Gets Nasdaq Notice.)

Comverse's stock is trading down 60 cents, nearly 3 percent, at $21.07 today, giving it a market value of $4.25 billion. The company's stock fell from $29.15 to $24.85, nearly 15 percent, on March 14 immediately after the vendor first announced it was investigating its stock option history.

— Ray Le Maistre, International News Editor, Light Reading

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