Where in the world is Kobi Alexander?

August 26, 2006|By Jonathan Peterson | Jonathan Peterson,Los Angeles Times

In the unfolding saga of stock-option fraud, few characters are more curious than an Israeli entrepreneur named Jacob "Kobi" Alexander.

The 54-year-old entrepreneur, who nurtured Comverse Technology Inc. from a penny-stock, high-tech wannabe to a leading producer of voice-mail software with 5,000 employees, fled the United States this month rather than face charges of scheming to manipulate his company's stock options.

Israeli newspapers reported Thursday that a private investigator had sighted Alexander in a fishing village in Sri Lanka. U.S. authorities had little to say about the reports, except that they are continuing their efforts to reel him in.

"Bottom line: We have no confirmation of his whereabouts," said Robert Nardoza, a spokesman for the U.S. attorney's office in Brooklyn, N.Y. "The investigation is ongoing."

The hunt for Alexander, abetted by an Interpol "red notice" sent to police agencies throughout the world, grew out of the government's widening investigation into stock options fraud - "the newest trend in investor fleecing," in the words of James H. Burrus Jr., assistant director of the FBI's criminal investigative division.

Options give their holders the right to buy stock for a certain price within a certain time limit. Typically, that price is the same as the price on the day the option was granted. But at Comverse and dozens of other companies under scrutiny, insiders appear to have selected earlier dates with lower stock prices, which could boost their profits.

Comverse stands out as only the second company where former executives have been charged with criminal fraud, although Justice Department investigators are looking into at least 45 cases of possible options manipulation.

And the Securities and Exchange Commission is reviewing dozens more for civil violations.

On Aug. 9, federal officials in Brooklyn charged Alexander and two other former Comverse officials in an alleged options conspiracy dating back to 1991.

Alexander, David Kreinberg, the former chief financial officer, and William F. Sorin, the one-time general counsel, had resigned from Comverse in May.

Prosecutors say the misdeeds of the three executives stretched far beyond the simple backdating of options. The three are alleged to have deceived their own directors by awarding options to phantom employees, then shifting those awards to a slush fund to reward favored workers.

"I don't want to say anything about him," Robert G. Morvillo, Alexander's attorney, said recently. Morvillo noted, however, that he hadn't spoken with his client in "several weeks."

Overall, Alexander exercised $138 million in his stock options and gained at least $6.4 million in profit as the result of improper backdating, according to the Justice Department. As investigators were closing in this summer, Alexander wired $57 million to Israel, where his family keeps a second home.

The decision to flee U.S. authorities could be used as evidence of criminal intent, said Peter J. Henning, professor of law at Wayne State University and a specialist in white-collar crime.

"It puts him in a tough position to say he didn't do anything wrong - but he felt the need to go to Israel in the middle of a war," said Henning, who has worked at the Justice Department and the SEC.

Alexander was born in Israel, the son of Zvi Alexander, who is considered the founder of the country's meager oil industry.

Jacob Alexander served in the Israeli military and intelligence services and has spent much of his adult life going back and forth between Israel and the United States.

He holds degrees in economics from Hebrew University in Jerusalem and finance from New York University, where he earned his graduate degree at night while working days as an investment banker for what is now Lehman Brothers Holdings Inc. He returned to Israel in the early 1980s to pursue his own business ambitions, working on the predecessor to Comverse.

By 1984, Alexander was back in the United States, helping launch Comverse on Long Island. The company name was meant to convey "communication" and "versatility."

The startup took off in the 1990s, eventually selling its high-tech wares in more than 120 countries and seizing on niche opportunities, such as digital eavesdropping for law enforcement. In 2000, Chief Executive magazine named Alexander the nation's top CEO, and the company's annual revenue now exceeds $1 billion.

"He was the king of the world, and now he's a fugitive," said Shirley Yom-Tov, an editor of the Marker, an economics Web site owned by the Israeli newspaper Haaretz. "He's one of the great high-tech entrepreneurs who ever came out of Israel."

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