U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19964 / January 10, 2007
Accounting and Auditing Release No. 2537 / January 10, 2007
Securities and Exchange Commission v. Jacob (“Kobi”) Alexander, David Kreinberg, and William F. Sorin, United States District Court for the Eastern District of New York, Civil Action No. CV-063844 (GJ) (E.D.N.Y. August 9, 2006)
SEC Settles Options Backdating Case Against William F. Sorin, Former General Counsel of Comverse Technology, Inc.; Relief Includes Officer-and-Director Bar and Over $3 Million in Civil Penalties, Disgorgement, and Prejudgment Interest
The Securities and Exchange Commission today settled civil charges against William F. Sorin (Sorin), the former General Counsel of Comverse Technology, Inc., and a defendant in the Commission’s August 2006 enforcement action against three former Comverse executives arising from an alleged scheme to backdate stock option grants.
The Commission charged Sorin and two other former Comverse executives on Aug. 9, 2006, with, among other things, engaging over many years in a fraudulent scheme to grant undisclosed in-the-money options to themselves and to others by backdating stock option grants to coincide with historically low closing prices of Comverse common stock. Among other things, the Commission’s complaint alleges that Sorin created company records that falsely indicated that Comverse’s compensation committee had approved a grant of stock options on a date when, in reality, no such corporate action took place. The complaint also alleges that Sorin created false company records that facilitated a similar backdating scheme at Ulticom, Inc., another public company that is a majority-owned subsidiary of Comverse.
Without admitting or denying the allegations of the Commission’s Complaint, Sorin consented to the entry of a final judgment permanently enjoining him from violating and/or aiding and abetting violations of the antifraud, reporting, record-keeping, internal controls, false statements to auditors, and securities ownership-reporting provisions of the federal securities laws. Specifically, the proposed final judgment would permanently enjoin Sorin from violating Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(b)(5), 14(a), and 16(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1, 13b2-2, 14a-9, and 16a-3 thereunder, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder.
Sorin consented to the entry of an order permanently prohibiting him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. Pursuant to the order, Sorin is required to pay $1,670,915.03 in disgorgement, of which $1,007,201.58 represents the “in-the-money” benefit from exercises of backdated option grants. In addition, Sorin will pay $817,509.07 in prejudgment interest thereon, and a $600,000 civil penalty, for a total of $3,088,424.10. The settlement is subject to the approval of the United States District Court for the Eastern District of New York.
As part of the settlement, and following the entry of the proposed final judgment, Sorin, without admitting or denying the Commission’s findings, consented to the entry of an administrative order, pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending him from appearing or practicing before the Commission as an attorney.
In a separate matter filed in the United States District Court for the Eastern District of New York on Nov. 2, 2006, Sorin pleaded guilty to one criminal count of conspiracy to commit securities fraud, mail fraud, and wire fraud. The plea was the result of an agreement between Sorin and the United States Attorney’s Office for the Eastern District of New York.
The Commission’s investigation in this matter is continuing.