In a thrilling victory for investors, Pomerantz recently announced a $225 million settlement of the Comverse Securities class action, which will benefit investors in Comverse common stock during the period April 30, 2001 through January 29, 2008. $60 million of that amount will come from Kobi Alexander, former CEO of Comverse, in one of the largest recoveries from a former executive to settle a federal securities class action. Lead Plaintiff, the Menora Group, an Israeli based insurance company and pension fund, alleged that defendants engaged in stock option backdating and accounting irregularities which inflated Comverse's stock price.
Specifically, the Complaint alleged that 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. On 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%.
The parties intend to submit the settlement to the Court for preliminary approval immediately. If approved, the settlement represents the second largest options backdating settlement, and will be the largest settlement involving an Israeli institution serving as Lead Plaintiff.
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