Aug 2016 articles backdating stock options


21-Oct-2016 21:36

The court reasoned that it was immaterial whether any of the people in the EDNY made an investment, because "[t]he making of an investment is not an element of the crime of securities fraud.Instead, the mere use of material misrepresentations to solicit investment is the 'essential element of the crime' in furtherance of securities fraud." Further, the court reasoned that venue was proper in the EDNY because the defendants knew that the cold-call list was a nationwide list and it was reasonably foreseeable that the list would include people in the EDNY.Finally, the court concluded that the government need not show that the defendants aided and abetted specific acts carried out by others in the EDNY for venue to be proper there.In securities-fraud prosecutions, venue is proper both in the district where the principal acts and where a defendant commits accessorial acts. About 10 years ago, the federal courts were replete with prosecutions for stock-option backdating.held that in securities-fraud prosecutions, "[v]enue is proper not only in the district where telephonic or electronic materially fraudulent communications were initiated, but also in the district where such communications were received." involved a scheme in which people were solicited to invest under false pretenses in a precious-metals mining company.The company was run outside the Eastern District of New York (EDNY), but about 2 percent of the people on cold-call lists used by the schemers were residents of the EDNY.At the plea hearing, notwithstanding his decade abroad, Alexander had the chutzpah to seek release on bail pending sentencing. [Alexander's] intelligence and his guile are clear indications that he can't be trusted." For the press release from the U. Attorney's Office for the Eastern District of New York, click here.In 2006, the government was investigating Comverse Technology Inc.

In its simplest terms, that is a practice in which stock-option grants, which are the rights to buy shares at a fixed price, are backdated to a day when the stock price was more favorable to the grantee.

It runs afoul of the federal securities laws because it manipulates the stock to ensure that the grantee receives instant gains by choosing the starting price for the option.

The defendants were ultimately indicted in the EDNY and convicted of securities fraud.

They made motions for judgments of acquittal based on improper venue, and the district court granted their motions as to some counts. On appeal, the Second Circuit held that venue is proper in the district in which telephone calls are received, which included the EDNY in this case.

To avoid prosecution, the firm's chairman, Jacob "Kobi" Alexander, fled to Namibia, which is a nation in western Africa that has no formal extradition treaty with the United States.As reported here, just recently, some 10 years later, Alexander returned to the United States and pleaded guilty to the backdating charge.