David Kreinberg former chief financial officer of voicemail software company
Comverse, has become the
first major executive to plead guilty to conspiracy and securities fraud in
connection with options backdating.
After giving himself up to the
FBI in August, Kreinberg
entered into a plea-bargain with federal prosecutors, as the
Securities and Exchange Commission announced
that he had also agreed to pay $2.4m to settle civil fraud charges.
His plea clears the way for Kreinberg to testify against former chief
executive Jacob ‘Kobi’ Alexander, who is fighting extradition from Namibia to
Options backdating involves awarding stock options at an exercise price below
the prevailing market price at the time of the award. Dating the options in such
a way almost guarantees that these options will generate bumper returns;
providing the recipients with significant profits. The practice can also be used
to overstate profits or understate losses in financial reports.
Giving his guilty plea at a federal courthouse in Brooklyn, Kreinberg
confessed to knowing that ‘my actions and agreements with others at the company
– to act as I have – were wrong.’ He is currently free on $1m bail.
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