Two former officers of US software firm Comverse surrendered to FBI agents last night in widening investigation of corporate stock option manipulation.
With more than 80 investigations under way at dozens of companies, former Comverse finance chief David Kreinberg and former senior general counsel William Sorin surrendered and appeared in court in New York. Both were released, each on a $1 million bond.
An arrest warrant was issued for Comverse co-founder and former CEO Jacob "Kobi" Alexander, said US deputy Attorney General Paul McNulty. Mr McNulty would not comment on the whereabouts of Mr Alexander, a citizen of both the United States and Israel.
The US justice department said it has seized more than $45 million from two investment accounts in Mr Alexander's name and alleges the ex-Comverse CEO was involved in recent months in "a money laundering scheme involving the secret transfer of more than $57 million to accounts in Israel".
The Comverse case is the second leading to charges from a wide-ranging US government inquiry into backdating and other abuses of stock options that appeared to have occurred during and after the late 1990s technology and telecommunications stock bubble.
The government alleges that the Comverse defendants from 1998 to 2002 reaped millions of dollars in profits by altering the grant dates of stock option awards to boost gains available to themselves and favoured employees.
Last month, authorities brought their first options manipulation case against three former officers of high tech group Brocade Communications Systems. The Brocade and Comverse cases are likely to be followed by many more centring on options misconduct, according to people familiar with the multi-agency investigation.
The US Internal Revenue Service is investigating as many as 40 companies over options misconduct.
At issue is backdating in which options are awarded on one date, but the grant date is recorded earlier to precede a rally in the shares, locking in profits for the option recipient.
Also under scrutiny is "spring-loading", where grant dates are set in advance of a positive announcement, and "bullet-dodging" where the dates are set to follow a negative announcement. In both cases, the dates are set to anticipate a share price rally and lock in option recipient profits.
The practices are not illegal, but can run afoul of the law if not properly disclosed, taxed and accounted for.