Comverse Technology Inc. Case 04/10/2008
UPDATE - April 2010 - A settlement has been reached in the amount of 225,000,000 dollars in the Comverse Technology case. The affected class period is 4/30/01 to 1/29/08 with a strict deadline of 08/05/2010 for claim filing.
UPDATE - DEC 2009 - Comverse Technology Inc. (Nasdaq:CMVT) is reportedly close to a settlement with investors concerning the class action suit over the options backdating affair. Sources say it is expected that Comverse Technology will pay investors between $200-250 million to settle the suit against it in the US. The belief is that the company itself will pay between $140-170 million to investors in a number of payments during 2010 and former Comverse founder Kobi Alexander, who fled the US and settled in Namibia, will pay $50-60 million from his own pocket as part of the settlement. It is also expected that all parties under the settlement agree that Comverse will not admit any culpability over the affair.
On March 5, 2008, the plaintiffs filed a Second Consolidated Amended Complaint and later filed a revised version of the complaint on April 10, 2008. An individual defendant filed a motion to dismiss in part. On July 15, 2008, the lead plaintiffs filed a motion to certify the class. On July 18, 2008, the individual defendant’s motion to dismiss was granted and the claims against him were dismissed.
In an article dated February 26, 2008, Comverse Technology Inc., the world’s largest maker of voice-mail software, lost a bid to dismiss a lawsuit filed by investors who said they were defrauded by an options-backdating scheme led by ex-Chief Executive Officer. United States District Court Judge Nicholas Garaufis, in Brooklyn, New York, denied a request by Comverse to dismiss a consolidated class-action, or group lawsuit, filed in 2006 against Comverse and other former top executives.
Plaintiffs filed a Consolidated Amended Complaint on March 23, 2007. Defendants filed their first motions to dismiss the Consolidated Amended Complaint on July 30, 2008, while one individual defendant filed his motion to dismiss on August 21, 2007.
The original Complaint alleges that defendants violated federal securities laws by issuing a series of materially false statements. Specifically, defendants failed to disclose information regarding the true timing of stock option grants made to key executives. This manipulation of the grant dates permitted the individual defendants to enrich themselves, while artificially inflating net income, operating income and retained earnings. Had the timing not been manipulated, and properly accounted for, these financial measures would have been materially lower.
The complaint further alleges that on or around March 14, 2006, Comverse announced the creation of a special committee of its Board of Directors composed of outside directors to review matters relating to the company’s stock option grants, the accuracy of the stated dates of option grants and whether all proper corporate procedures were followed. Then, on April 17, 2006, Comverse revealed that it would restate its financial statements for the first three quarters of fiscal 2006, for the 2001-05 fiscal years, and possibly previous periods. The adjustments are expected to be material. On this news, Comverse stock dropped from $29.15 on March 13, 2006 to $23.31 on April 17, 2006, a decline of over 20%.
Similar securities class actions against Comverse Technology, Inc. have also been filed in the U.S. District Court for the Southern District of New York.