ZICHRON YAACOV, Israel The list of Israeli technology companies facing allegations that they timed or backdated managers' stock option awards to coincide with low share prices has ballooned in recent days. Comverse Technologies, Zoran Corp. and DSP Group have joined Mercury Interactive Corp., whose troubles began six months ago.
Mercury, an enterprise-software optimization company, accepted the resignations of CEO Amnon Landan, CFO Doug Smith and general counsel Susan Skaer last year when it was revealed that the date of stock option grants given to Landan and other executives had been retroactively amended to dates on which the share price had been low.
Landan returned the money to the company. Mercury's shares were delisted from the Nasdaq to the Pink Sheets, a stock quotation service that isn't regulated, because the company had not yet published revised financial reports for the years up to 2002 in which the options had been granted.
Last week found Nasdaq-listed multimedia-software and -systems provider Comverse Technologies and its CEO, Kobi Alexander, in the hot seat. Comverse announced it was launching an internal investigation into the timing of options granted to Alexander and a group of senior executives. The internal review stems from reports in The Wall Street Journal. The U.S. Securities and Exchange Commission will likely look into Comverse's stock option practices, according to a report here.
The report in Wednesday's (March 22) edition of The Marker, an Israeli financial newspaper, similarly implicates chip makers Zoran and DSP Group.
According to the report, Zoran founder and CEO Levy Gerzberg received options six times between 1998-2002, all on days when the when the company's share price was at a low for the period in question.
The report alleges a similar pattern at DSP Group, which Intel purchased in 1999 for $1.6 billion.
A DSP Group spokesman told The Marker that the allegation is baseless, adding that the managers were allocated options by the board of directors and the compensation committee at prearranged meetings, and that prices were fixed according to the markets on the day of allocation and were never backdated. The spokesman also said DSP Group would hold The Marker liable for any damage caused to it by the report's allegations against the company.
"In Israel, the local high-tech industry has always been perceived as a glittering, squeaky-clean sector where the leading companies were terrific at creating new inventions with the help of their mastermind engineers, genius physicists and absentminded mathematicians," said Guy Rolink, high-tech analyst for The Marker. "But the truth is that many of the high-tech managers, mainly at the blue-chip companies, have become masters of financial engineering."