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In settling with the SEC, the former Comverse CFO consented to, among other sanctions, a permanent injunction against violation of the securities laws, a permanent bar against serving as a corporate officer or director, and payment of .4 million in disgorgement and pre-judgment interest.At the same time, in a related criminal action brought by the US Attorney, Kreinberg pled guilty to securities fraud and conspiracy to commit securities fraud, mail fraud and wire fraud, and he now faces up to 15 years in jail, mandatory restitution and a possible criminal fine.The SEC's case against Tomasetta and Hovanec is contested. In 2007, the company and executives settled a class action over backdating allegations for .2 million, plus about 3 million shares of stock.
In this regard, we identified stock options grants as a potential trouble spot several years ago well ahead of the curve.
And in the Enforcement Division, we gathered information and data regarding specific cases to bring the issues into focus, culminating in our enforcement actions over the last several years. I am old enough to remember employee stock options as an anti-takeover device.
At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.
These developments also tended to favor at the money grants.
For example, at the money options received more favorable accounting treatment they did not need to be expensed.