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The SEC’s press release about the settlement can be found here.The SEC had charged Sorin, along with former Comverse CEO Kobi Alexander and David Kreinberg, Comverse’s former CFO, of engaging in a scheme to backdate Comverse options grants from 1991 to 2001.The SEC’s complaint against the three former officials can be found here.Their scheme is alleged to have resulted in the restatement of income because of the understatement of Comverse’s compensation expense.Even though Sorin neither admitted or denied the allegations against him, the allegations provide an interesting context to assess the op-ed authors’ assertion that backdating is no more than a mere scrivener’s error.By contrast to the benign picture the op-ed authors conjure, Sorin was alleged to have personally benefited; he was alledged to have falsified documents, both at Comverse and at Ulticom; and Comverse investors were alleged to have been deceived because income was overstated by the understatement of expense.
As I have pointed out (here), the grant related practices under scrutiny at Apple involve both options springloading as well as options backdating.
The media has jumped on the story, looking for scapegoats and all too eager to see this story as one more example of “greedy” corporate executives enriching themselves (supposedly) at shareholder expense.
There is no doubt that some of the media coverage has swept with too broad a brush, and lumped together many companies and many kinds of activities as if the activity and the companies were all equivalent and equally culpable.
Using these elements as a framework to assess potential culpability, it seems to me that the op-ed authors’ theme that backdating is essentially innocent gets weaker the more a particular set of circumstances involves personal benefit, document falsification, and the greater the impact the activity had on the company’s reported financial condition.
As they correctly contend, cases without these elements lack indicia of securities fraud.