Former executives of Comverse Technology Inc. will pay $62 million to partially fund a class action settlement stemming from alleged stock option backdating. Most of the money will come from the voicemail software maker's former CEO, who fled the country to avoid prosecution in the backdating scheme.
Former CEO Jacob "Kobi" Alexander, who fled to Namibia in 2006, will pay $60 million to Comverse. In return, New York-based Comverse will drop its lawsuit against the fugitive executive.
In addition, Comverse's former General Counsel William Sorin and former Chief Financial Officer David Kreinberg will pay a combined $1.35 million to Comverse, and a similar suit against them by the company will be dropped.
Also, several former members of Comverse's board will forfeit 155,500 outstanding unexercised options as part of the settlement. The company also agreed to several corporate governance changes, including keeping the roles of its chairman and CEO split, and requiring its chairman to be an independent director.
Alexander, Sorin and Kreinberg also agreed to drop countersuits against the company.
The deal will settle shareholder derivative actions brought in New York State Supreme Court by the firms Milberg LLP and Barroway Topaz Kessler Meltzer & Check LLP, and the U.S. District Court for the Eastern District of New York by the firm Bernstein Litowitz.
The money Comverse receives will be used to help fund a $225 million class action settlement announced recently by the firm Pomerantz Huadek Grossman and Gross. Investors who held Comverse common stock between April 30, 2001 and Jan. 29, 2008 will see benefit from the settlement.
In a regulatory filing, the company said its $165 million portion of the class action settlement _ not including Alexander's payments _ will be paid in four installments through August 2011.
Comverse settled charges regarding the allegations of improper backdating of stock options and other accounting problems with federal regulators in July. The company, which didn't admit or deny guilt to the Securities and Exchange Commission, wasn't fined.
The violations resulted from actions taken by the former executives, all of whom left the company in 2006.
The SEC and federal prosecutors charged them with a scheme to manipulate stock options for profit. The options' grant dates were allegedly falsified to coincide with a low point in the stock's value.
Alexander fled in 2006 to Namibia, which does not have an extradition treaty with the U.S., and has fought being sent back to the U.S. in that country's courts.