On August 9 the second set of criminal charges was laid against US executives for option backdating. The complaint   provides an interesting insight into an effective whistle blowing policy, and the role of in-house lawyers that could be a model for Australian company secretaries.

The US government alleged that Jacob Alexander, the co-founder and former chief executive of the NY based Comverse, David Kreinberg, its former chief financial officer, and its former in-house lawyer and longtime corporate secretary William F. Sorin, conspired to alter the option dates.

Mr. Alexander is the second CEO to be swept up in the ongoing government investigations into the manipulation of the dates of option grants. Last month, prosecutors in San Francisco charged Gregory L. Reyes, the former chief executive of Brocade Communications Systems and another executive with one count of securities fraud each and accused them of doctoring records (see HERE).

At Comverse, when the scheme started to unravel and the three were confronted by the company’s in-house lawyers in early March of this year, the complaint says they explained “hypothetically speaking” that there might be issues with the dates the options were awarded. When the company lawyer said he was calling an emergency meeting of the board of directors to report the turn of events, Mr. Alexander and Mr. Kreinberg, said the lawyer was overreacting and urged him to conduct the internal investigation into the matter personally, rather than hire an outside legal firm.  He declined their request, the complaint said.

The company will need to restate accounts or face delisting from Nasdaq. 

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