According to a December 17, 2009 press release from the lead plaintiff’s attorneys, the parties to the Comverse Technology options backdating related securities lawsuit have agreed to settle the case for $225 million dollars. A particularly noteworthy feature is that the settlement amount includes a $60 million individual contribution from the company’s former CEO, Kobi Alexander, who famously fled to Namibia after the options backdating allegations surfaced.
The $225 million settlement represents the second largest of settlement of an options backdating-related securities class action lawsuit. The only larger backdating settlement is the mammoth $925 million settlement of the UnitedHealth Group options backdating securities suit (about which refer here and here). A complete list of options backdating settlements and case resolutions can be found here.
According to data compiled by Adam Savett of the Securities Litigation Watch, and taking into account this latest settlement, of the 39 options backdating related securities class action lawsuits that have been filed, 22 have now settled, along with nine that have been dismissed, meaning that there are still nine of the securities suits yet to be resolved. The $225 million settlement far exceeded the prior average options backdating securities suit settlement of about $74 million (or $31.82 million if the outsized UnitedHealth Group settlement is dropped out of the equation). The aggregate amount of all the options backdating securities suit settlements is, with the Comverse settlement, now up to $1.785 billion. UPDATE: The Securities Litigation Watch has updated its analysis to reflect the Comverse settlement, here.
Alexander’s extraordinary agreement to contribute $60 million to the settlement out of his own funds represents something of a milestone. The plaintiffs’ lawyers press release says that the amount "one of the largest recoveries from a former executive to settle a federal securities class action." By way of comparison, former UnitedHealth Group CEO William McGuire agreed to pay $30 million in settlement of the securities class action claims against him, as well as to have certain unexercised options grants canceled.
Regardless of where the amount falls in terms of size of individuals’ settlement contributions, it undoubtedly is the largest contribution by an individual defendant while simultaneously evading extradition. Alexander’s getaway to Namibia provided one of the more interesting subplots of the entire options backdating episode. You do kind of wonder exactly how he is going to handle the currency transfers. UPDATE: The parties' agreement regarding this settlement, which can be found here, specifically references various investment accounts of Alexanders that were seized by the U.S. Marshall's service. The agreement indicates (see page 17-19) that Alexander will cooperate and facilitate in the forfeiture of those accounts.
In addition, none of the information available to date about the securities class action settlement reveals whether the settlement resolves or even addresses the separate lawsuit that Comverse filed against Alexander and the firm’s former General Counsel, in which the company sought to recover $70 million in damages. Nor does the available information disclose whether or not the settlement resolves or addresses the separate lawsuit that Alexander filed against Comverse for more than $72 million of severance and other compensation.
The details surrounding the settlement contributions from Comverse itself are not entirely clear, either As of the time and date of this blog post entry, the parties have not yet filed their settlement agreement with the court, not has the company made any disclosures about the settlement. The information publicly available about the settlement does not disclose whether or not insurance will make any contribution to the settlement. However, at least one media story about the settlement suggests that the company will make its contribution in a number of payments during 2010, which, at least to the extent of those payments, seems inconsistent with funding for the settlement from insurance. UPDATE: According to Ben Hallman's December 18, 2009 article in the AmLaw Litigation Daily (here), Comverse intends to finance its $165 million share of the settlement by selling auction rate securities back to UBS, and if that doesn't work it will cover the amount with a a mix of cash and stock. Under the settlement agreement, Comverse's payments are to be paid into the settlement escrow account in a series of staged payments during 2010 and 2011.
Clearly there are still some details yet to be revealed about the settlement. I will supplement this post if I am able to unearth more details about the settlement.
One final note about the Comverse Technology options backdating issues is that this is one case that has resulted in a successful criminal prosecution. Even though the company’s former CEO is still evading extradition in Namibia, prosecutors did secure a criminal guilty plea from the company’s former General Counsel. In the wake of the dismissal of all of the individual indictments in the Broadcom case that I blogged about yesterday, it is notable that this is one case where the criminal charges stuck – again, notwithstanding Alexander’s evasion of arrest.