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Jacob “Kobi” Alexander Pleads Guilty To Securities Fraud

Jacob Alexander, also known as “Kobi Alexander,” an Israeli national, pleaded guilty on Wednesday to one count of securities fraud for his role in a stock options backdating scheme involving Comverse Technologies Inc. (Comverse). Following a bail hearing, the court entered a permanent order of detention.

Alexander was a founder, former Chief Executive Officer, and member of the Board of Directors of Comverse, which was traded on the NASDAQ stock market. Comverse was a component stock of the S&P 500 and the NASDAQ 100 at the time of the offense. Alexander was ordered extradited from Namibia on Monday, August 22, 2016, after having been indicted in the Eastern District of New York more than ten years ago. Alexander arrived at John F. Kennedy International Airport in Queens, New York, this morning in the custody of special agents of the Federal Bureau of Investigation. When sentenced, Alexander faces up to 10 years in prison. Sentencing is set for 12:00PM on December 16, 2016.

The extradition and guilty plea were announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

“By fraudulently backdating Comverse stock options, the defendant personally gained millions of dollars in paper profits. He then compounded his crime by attempting to bribe a witness to make false statements to government investigators. For more than ten years, law enforcement pursued Kobi Alexander, and now he will be held to account for his role in a securities fraud scheme,” stated United States Attorney Capers. “The guilty plea announced today demonstrates our steadfast commitment to enforce the law against corporate executives who defraud the investing public.”

“The wheels of justice turn slowly but they keep moving; this is especially true in the case against Jacob “Kobi” Alexander. Today, Alexander pled guilty to a charge that was brought forth by the FBI more than 10 years ago for his role in a securities fraud scheme. Alexander and his coconspirators backdated the issuance of Comverse stock options, awarded them to themselves, and then lied to investors in public filings. The scheme profited Alexander millions of dollars. Ensuring that all investors have factual information and our markets are fair is exactly why the FBI continues to investigate and bring those to justice who perpetrate securities fraud schemes,” stated FBI Assistant Director-in-Charge Rodriguez.

U.S. Attorney Capers and FBI Assistant Director-in-Charge Rodriguez thanked the Department of Justice’s Office of International Affairs (OIA), the National Police for the Republic of Namibia, Interpol, and FBI Legat Pretoria for their invaluable assistance during the extradition proceedings. They also thanked the Securities and Exchange Commission (SEC) for their cooperation and assistance in the investigation and prosecution.

According to charging documents, the guilty plea proceeding, and other documents filed by the government in this case, Comverse was a communications software company with offices in Woodbury, New York. Between 1998 and 2006, the defendant and his coconspirators engaged in a fraudulent backdating scheme using hindsight to select the issuance date of Comverse stock options, which they awarded to themselves and Comverse employees, and then lied about this practice to investors in public filings and elsewhere. In doing so, the defendant and his coconspirators were able to select issuance dates when Comverse stock was trading lower, thereby awarding themselves and Comverse employees “in-the-money” options without properly accounting for these options in Comverse’s financial disclosures to investors. By backdating options, the defendant and his coconspirators violated accounting rules and caused Comverse to overstate its profits. Additionally, the backdated options also violated the terms of Comverse’s stock option plans that were approved by its shareholders. As the top recipient of stock options in every company-wide grant, the defendant gained millions of dollars in paper profits from the scheme. Ultimately, the defendant forfeited $60 million, which was applied as restitution to compensate Comverse shareholders.

When the defendant’s conduct came to light, he attempted to obstruct justice by offering to bribe a witness to make false statements to federal investigators. Shortly before being charged in connection with his scheme, and after he was aware of the government’s investigation, the defendant moved to Namibia, where he relocated with his family. The government promptly sought the defendant’s extradition.

Today’s guilty plea took place before United States District Judge Nicholas G. Garaufis.