Comverse’s Kobi Alexander Gets 30 Months in Prison for Securities Fraud

Former Israeli tech star hid out in Africa for a decade before agreeing last year to face charges of manipulating stock options in a New York court.

The family of Jacob “Kobi” Alexander -- his wife, Hanna Alexander and their adult children, two daughters and a son -- leave the Federal Courthouse in Brooklyn after he was sentenced to 30 months in prison, Feb. 23, 2017.
Natan Dvir

Jacob “Kobi” Alexander, who founded and led Comverse Technology, once one of Israel’s biggest high-tech companies, was sentenced in New York on Thursday to 30 months in prison for securities fraud.

The sentencing came 16 years and more after the offenses were committed, because in 2006 Alexander fled to Namibia to avoid prosecution. He only agreed to return to the United States to face charges last year.

U.S. District Judge Nicholas Garaufis in Brooklyn, who determined the sentence, criticized the former executive for trying to avoid justice for so long. “I really don’t understand how someone as brilliant and accomplished and focused and respected as you could be so incredibly, abjectly foolish to make some of the decisions you made,” he said.

The sentence was above the two years or less his lawyers had sought, but less than the 10-year maximum that he faced. Alexander, dressed in brown jail clothing, said he was “truly sorry for everything I have done wrong.”

“I deeply regret running away instead of dealing with the justice system like I should have,” he added.

The 64-year-old Israeli has been in custody since he pleaded guilty to securities fraud in August, after Garaufis rejected his request for release on a $25 million bond. He is expected to receive credit for his time in jail.

The case was one of the last open U.S. prosecutions arising from government or internal investigations of backdating of stock options at over 200 companies, including Comverse, which was acquired in 2013 by former unit Verint Systems.

Until he fled to Namibia 11 years ago, Alexander had been among the leaders of Israeli high-tech. He founded Comverse, originally known as Efrat Future Technologies, together with Boaz Misholi and Yechiam Yemini in 1982, and four years later they took it public on Wall Street. A pioneer in developing voicemail technology, the company reached a stock market valuation of $22 billion and became the first Israeli company to win a place in the S&P 500 index.

Alexander was just 35 when he became the company’s chairman and CEO, in 1987.

Prosecutors said that from 1998 to 2001 Alexander participated in a scheme to use hindsight to select the effective dates for granting options for employees, resulting in misleading statements to investors.

In backdating, a company retroactively grants stock options on dates when stock prices were lower, making them more valuable. Concealing the practice through improper accounting is illegal, and can inflate earnings.

Alexander fled to Namibia with his family in July 2006 as investigators were closing in on him. Charges were announced a month later against him, William Sorin, who was Comverse’s general counsel, and David Kreinberg, its finance chief.

Sorin pleaded guilty and was sentenced to one year in prison. Kreinberg was spared prison after pleading guilty.

While abroad, Alexander agreed in 2009 to pay $60 million to Comverse in connection with shareholder litigation, and to waive over $72 million in claims he had against Comverse. He settled related civil government lawsuits in 2010, resulting in a $6 million penalty by the U.S. Securities and Exchange Commission.

It appeared after the two-hour hearing on Thursday that Alexander, his family and attorneys were satisfied with the outcome. Garaufis’ remarks had led them to believe he would impose a much stiffer sentence closer to the 10-year maximum. At the end of his sentence, which he will probably serve at a Pennsylvania prison, Alexander will be expelled from the United States and will presumably return to Israel.