Kobi and the American Way

Kobi Alexander looked white as a ghost.

On Thursday, May 5, he had been seated in the Continental Airlines business class, on the red eye to New York. Almost nobody in the section noticed the Israeli billionaire who was flying back home from Israel. Yes, until recently, he had made his home in New York.

A few hours before he boarded the plane, the Wall Street Journal had reported that the American authorities were investigating suspected criminal activity by Comverse Technologies (Nasdaq: CMVT) and its founder, Kobi Alexander.

Alexander was first off the jet. He strode rapidly to Passport Control at JFK, knowing that a man in his position might be in for an unpleasant surprise there.

By a truly miserable accident of timing, Alexander found himself standing next to an Israeli business journalist who was flying to Omaha, Nebraska, on the occasion of Warren Buffett's purchase of Iscar.

The official took Alexander's passport, passed it through computer, and motioned him through. It was evident that a weight had rolled off his back.

The Israeli business reporter tried to start a conversation with Alexander, but it was hard going. He also showed no interest whatsoever in the astonishing news that Warren Buffett was making his first ex-American acquisition, buying an Israeli company for $5 billion (to be precise, 80% of its shares for $4 billion). In an eyeblink, Alexander was gone.

Light years away

 The chance meeting with Alexander at JFK was light-years away from the happy meeting at a Tel Aviv café next door to the Comverse complex a year before.

Alexander got there early, dressed in very fastidious casual style. He lit a cigarette and spent more than two hours talking about the American capital market, about keeping in shape and cholesterol, about generic drugs.

Having weathered the great telecom meltdown of 2001-2003, Alexander had become a lot more sanguine. After years of labor, his friends related, he was starting to enjoy the vast wealth he had made.

The conversation ranged far and wide, and quite by coincidence, touched on an always-current topic on Wall Street: how companies handle stock options in their books.

Alexander was rock firm: stock option grants are a cost, he stated. Anybody who claims they don't need to be recorded in a company's profit & loss statement is a swindler, he said. He personally had always supported the American authorities' call to record stock options as a cost in financial statements, he clarified.

Alexander was one of the great believers in the American way. No wonder: the American way in general, and Wall Street in particular, had transformed him from an unknown man with a idea into one of the wealthiest men in the world, and one of the most highly esteemed entrepreneurs on the Street and in Israel.

He knew the American way inside and out. He knew American culture and Wall Street's, too. from time to time ,when meeting with the press in New York, he'd devote some of the time to explaining how Wall Street and corporate America work.

Why pick on him?

This week, one of his cronies complained that the Americans were picking on Alexander (out of the presumably hundreds of executives who might be suspected of stock option manipulations) because he's Israeli.

A year ago he'd never have said such a thing. Comverse had registered in the U.S. and its Israeli association didn?t create any problems, he used to say.

Yet - Alexander's decision to flee justice and hide in Namibia is highly symbolic, but not terribly surprising.

It had been clear where the winds were blowing on Wall Street in the six months, when it came to companies backdating their stock options.

Some four months ago, American lawyers and economists estimated that the stock options investigation would become one of the widest since the Enron scandal, and Alexander knew what he was facing. He too saw one former high-flying executive after another being slammed behind bars, for long periods of time, too.

The writing on the prison wall

Bernie Ebbers, a true-blue Canadian and a highly respected figure on Wall Street and America for years, the man who led Worldcom to a value of $190 billion, was sentenced to 25 years.

Alexander knew that American lawmakers were not merciful, and that if he couldn't reach a plea bargain, he'd find himself starring in a perp walk, handcuffed in the media glare for the convenience of the press photographers.

Many hi-tech companies indulged in back-dating stock options. Some did so aggressively, some less so. But one thing is sure: backdating is tantamount to stealing from shareholders.

Try googling "backdating options stealing money". You will get 47,200 results, most of which explain that it amounts to stealing money from a company or its shareholders.

When you're successful, there's nothing like America, where the sky really is the limit. But if you stumble, America is the cruelest place in the world.

Sweet dreams

The FBI manhunt after Alexander has troubled the sleep of many an executive on Wall Street, and not only the Israeli ones.

The investigation, the indictments, the heavy penalties imposed on Wall Street managers really have been deterring, and when it reaches an Israeli entrepreneur as successful and wealthy as Kobi Alexander, it's purely terrifying.

In fact, the determination that the Americans have shown in their hunt for Alexander threatens to belie one of the favorite axioms of the business world: that there's a level of wealth beyond which it doesn't matter how you made your money. From a certain level of riches, deficit facto - you're safe.

Plenty of Israelis have been involved in white-collar crime, but never before has a billionaire been caught. Men of his ilk usually close matters behind closed doors, or keep away from the fire altogether.

The FBI chase of Alexander to the ends of the earth is massively impacting not only the behavior of Israelis on Wall Street, but here too. Today the world is a global economic village, and the Israeli law enforcers cannot ignore events on Wall Street.

On the eve of Yom Kippur, Kobi Alexander was tracked down and arrested in Namibia. That day we asked a director of an Israeli company that had floated on Wall Street during the last year, whether he wasn't rethinking the risks. "I don't mean to break the law, and don't mean to hire people that even think that way, so I'm not particularly bothered," he said.

Simple enough, his answer. But managers at big companies know that there's a lot of gray in business, and under a powerful enough light, what looked gray can turn black as night. And if Kobi Alexander, a man worth $250 million in banks around the globe, has to flee to Namibia to hide from the Law, it seems that the risk is greater than many had thought.