A very long ten years ago – before the financial crisis, before the Euro crisis, before the Brexit vote — there was the options backdating scandal. The wave of litigation the scandal stirred up took its time to work its way through the system, but eventually the litigation was resolved and the scandal moved into the past. Even though the the scandal moved into the realm of history several years ago, there was one small but important unresolved item. The criminal case against Jacob “Kobi” Alexander, the former CEO of Comverse Technology, Inc., remained open, because shortly before he was about to be indicted, Alexander fled to Namibia. This strange but interesting chapter of the options backdating saga came closer to resolution last week when Alexander – back in the U.S. from his Namibian refuge — appeared in federal court in Brooklyn to enter a guilty plea to a single charge of securities fraud.
In May 2006, just before he was indicted on multiple counts of securities fraud in connection with alleged options backdating, Alexander traveled to Israel. After prosecutors filed a 35-count indictment against him, rather than returning to the U.S., Alexander traveled first to Germany and then to Namibia, an African country with which the U.S. has no extradition treaty. The details of the criminal indictment and of the efforts of the U.S. to secure Alexander’s extradition from Namibia can be found here.
As I noted in an April 2007 post about Alexander’s Namibian retreat (here), Alexander has sought to ingratiate himself to his Namibian hosts by investing in local business and making large charitable donations. As Bruce Carton also noted in his August 25, 2016 Compliance Week post about Alexander’s return (here), Alexander also reportedly paid for 200 guests to fly from New York and Israel for his son’s Bar Mitvah.
While Alexander remained safely ensconced in his Namibian hideaway, the government’s prosecution of other Comverse executives went on. Notwithstanding Alexander’s evasion, prosecutors did secure a criminal guilty plea from the company’s former General Counsel, William Sorin, which was noteworthy at the time as one of the rare instances where options backdating allegations resulted in a criminal prosecution.
Many of the backdating-related matters involving Alexander ultimately were also resolved. Alexander resolved the enforcement action that the SEC filed against him by agreeing to pay $53.6 million to the agency, inclusive of a $6 million penalty. In addition, the securities class action lawsuit that investors filed against the company and its directors and officers was settled in December 2009 for $225 million, inclusive of a $60 million contribution from Alexander. At about the same time, the parties to the Comverse Technology options backdating-related derivative lawsuit also reached a settlement; the bulk of the settlement consisted of Alexander’s separate agreement to pay the $60 million toward the securities lawsuit settlement.
From time to time over the last ten years, I thought about Alexander in his Namibian hideaway. According to Wikipedia, Namibia is about half the size of Alaska, but is one of the most sparsely populated countries on earth. Its population of about 2 million is roughly equivalent to the population of the Cleveland metropolitan area. The official language is English. Adjacent to South Africa on Africa’s west coast, Nambia’s climate ranges from desert to subtropical, and is generally hot and dry. Windhoek (pronounced “Vind-hook”), Namibia’s capital, where Alexander reportedly was living, has about 230,000 people, and has a semi-desert climate. Minimum temperatures rarely fall below 40 degrees F. It all sounded pretty idyllic, at least on paper.
I thought of Alexander again, just a short time ago. In one of my recent installments of Frisbee Photos, one reader sent in pictures of a D&O Diary Frisbee taken on Namibia’s Skeleton Coast, an area where numerous shipwrecks have taken place. Just the reference to Namibia made me recollect Alexander’s exile there, and gave me pause to wonder whether he was living happily there or slowly going mad in his African redoubt.
Namibia also came up a short time ago, as scholarship has emerged about the brutal genocide that took place in what is now Namibia under German colonial rule in the late 19th century. While this tragic history has absolutely nothing to do with Alexander, the mention of Namibia did make me think of him.
Whatever Alexander was able to make of his Namibian retreat, he is now back in the U.S. Alexander appeared in the Brooklyn courtroom of U.S. District Judge Nicholas Garaufis to enter a guilty plea to a single count of securities fraud relating to options backdating. According to news reports, the guilty plea was the “product of more than two years of sensitive negotiations among the Justice Department, Alexander’s attorneys, and Namibian government authorities.” While Alexander’s return to the U.S. might be interpreted as a change of heart on his part after years on the lam, the involvement of the Namibian authorities in the process does suggest that his return may not have been entirely voluntary on his part.
Much of the hearing last week was devoted to the question of whether or not Alexander should be able to remain free on bond while awaiting sentencing. Judge Garaufis, well aware that Alexander fled once before, was having none of that. Among other things Garaufis reportedly said, “Spare me, I wasn’t born yesterday.” Alexander will remain in jail awaiting his December 16, 2016 sentencing.
It is not really an available option, but I would really be interested in interviewing Alexander. He is now 64 years old. He spent the past ten years as a fugitive, in a foreign country, in what can only be described as the strangest of circumstances. To be sure, his family, including his wife, was with him. And it sounds as if others were able to visit him, at least occasionally. I just wonder, what did he make of his exile? How does he feel now about his decision to flee? What did he make of Namibia? When he fled, what did he intend, for himself and for his children? Why did he return? What does he expect or hope for in the future, for himself and his family?
In the end, it is all a very strange story, one of those may examples that proves how frequently reality can be so much more interesting that fiction.
A Break in the Action: Owing to my extensive travel commitments over the next several weeks, the D&O Diary will be taking a publication break. There may be a few posts while I am away, but I will not be able to resume the regular publication schedule until mid-September. Thanks to my loyal readers for all of your support.