SEC goes after stock option 'fraud'

The US Securities and Exchange Commission (SEC) has charged three executives with fraud over a long-running option backdating plan.

The SEC alleges that three executives at the US telecommunications company Comverse - former chief executive Jacob Alexander, former chief financial officer David Kreinberg and former general counsel William Sorin - conspired to defraud shareholders by awarding themselves and others undisclosed options. The options were allegedly backdated to times when Comverse's shares were especially low, maximising their profit.

Alexander and Kreinberg also granted options to non-existent employees to build up a 'slush fund' for recruitment, the SEC says.

The three men face civil and criminal charges in New York for conspiracy and fraud, which allegedly netted Alexander almost $138 million; while Kreinberg and Sorin made $13 million and $14 million respectively from their option sales, the SEC says.

The SEC and other agencies have been investigating option backdating at 80 US companies during the past few months. Last month the former chief executive of another technology company, Brocade Communications, was charged with securities fraud over backdating.

Backdating is not itself illegal, but several companies, it is alleged, have been covering up the cost of issuing the options.