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March 27, 2013

In a Faded Wall St. Scandal, Lessons for a Current One

Remember Jacob Alexander? Perhaps you should. For as financial crisis prosecutions seem to fizzle out, his tale is a lesson: not only do financial scandals fade quickly from memory, but sometimes corporate executives really do pay for bad choices.

Mr. Alexander, known as Kobi, was the chief executive of Comverse Technology, a high-flying software communications company that was founded in Israel. In 2006, Comverse became enmeshed in the stock options backdating scandal that snared many technology companies in that period.

Federal authorities described Mr. Alexander’s scheme as a brazen one. For about 15 years, they say, Mr. Alexander regularly orchestrated the backdating of options. He was even accused of creating a secret slush fund for options to grant to employees for retention and as bonuses. Perhaps in hindsight, naming the fund “I. M. Fanton” after “The Phantom of the Opera” and then “Fargo” after the Coen brothers movie was not particularly a good idea.

Backdating was also a lucrative endeavor at Comverse. Mr. Alexander alone reportedly earned $138 million from selling backdated options from 1991 to 2001. But when the scandal surfaced, the chief executive along with Comverse’s former chief financial officer, David Kreinberg, and Comverse’s general counsel, William F. Sorin, were all charged with violating federal criminal laws as well as the securities laws.”

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Read full New York Times article here

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