For example, in 1999 the defendants set the option price a share below the fair market value on the day the options were actually granted.Alexander allegedly took for himself more than 300,000 of those backdated options, for a paper profit of over million.Once the Committee approved these options, Alexander and Kreinberg deposited the options in an account aptly named Phantom (later re-named Fargo).

We cannot allow corporate leaders to operate under different rules, using 20-20 hindsight to line their own pockets. Their alleged fraud affected the companys bottom line by deliberately misstating earnings, a material misrepresentation to shareholders.

We will continue to pursue misconduct in any boardroom where we find it. In addition, the SEC commenced a civil fraud and injunctive case against all three defendants for their roles in causing Comverse to publicly file false annual and quarterly financial reports and proxy statements from 1991 through 2005. As alleged in the complaint, from 1998 through 2001, Comverse adopted stock option plans designed to provide additional compensation for executives, including the defendants, and other employees.

The defendants alleged scheme came to light in early March 2006, when a reporter from the Wall Street Journal called Comverse and inquired about the unusual pattern in the timing of the companys stock option grants.

In response, the defendants attempted to cover up their scheme by authorizing false statements to be made to the reporter, and by lying to an in-house lawyer for Comverse and to the companys outside auditor.

The charges were announced by Deputy Attorney General Paul J. Mauskopf of the Eastern District of New York and Acting Assistant Director James Chip Burrus of the FBI.

Mc Nulty and Director of the Division of Enforcement Linda Thomsen of the Securities and Exchange Commission (SEC), joined by U. The charges stem from a coordinated investigation led by the Department of Justices Corporate Fraud Task Force.

The Justice Department is determined to see that our markets operate fairly and honestly, said Deputy Attorney General Mc Nulty. By backdating these options, the defendants, in effect, gave themselves and others an opportunity to place a bet in the middle of a race -- a bet that paid off handsomely.

Investors take risks and do their best to see into the future when picking companies in which to invest. As alleged in the complaint, the defendants abused their positions in order to enrich themselves and favored employees at the expense of the investing public, stated U. The alleged scheme of these defendants in back-dating options victimized both Comverse shareholders and the American people, said Assistant Director Burrus of the FBI.

The governments case is being prosecuted by Assistant U. Attorneys Ilene Jaroslaw, Linda Lacewell, Sean Casey and Kathleen Nandan.

The investigation was led by the FBI New York Field Office.

In addition to the backdating scheme, the complaint also alleges that Alexander and Kreinberg generated hundreds of thousands of backdated options, which they parked in a secret slush fund to be used at Alexanders sole discretion to benefit favored employees.