Comverse Technology, Inc.

Settlement Update
On June 23, 2010, Judge Nicholas G. Garaufis of the Eastern District of New York entered an order granting final approval of a $225 million class action settlement proposed by Lead Counsel Pomerantz Haudek Grossman & Gross LLP and Lead Plaintiff the Menora Group, with defendants Comverse Technology, Inc., Jacob "Kobi" Alexander, and certain of Comverse's former officers and directors. This represents the second largest recovery in a securities litigation involving the backdating of options, as well as one of the largest recoveries - $60 million - from an individual officer-defendant, Comverse's founder and former CEO, Kobi Alexander.

Case Summary
In Caiafa v. Comverse Technology, Inc. et. al. Pomerantz represents the Court-appointed lead plaintiffs, mutual funds Mivtachim Pension Funds, Ltd. and Menorah Insurance Company. The Complaint charges that the Company back-dated the grant of millions in options, and improperly accounted for such grants. Pomerantz secured the lead position in this case after extensive briefing and argument regarding the competing financial interests claimed by the various lead plaintiff applicants.

On October 31, 2007, Magistrate Judge Ramon Reyes issued a Report and Recommendation ("R&R") recommending that the District Court deny the overwhelming majority of Defendants motions to dismiss. Specifically, Defendants had argued that the "additional accounting" claims alleged in the Consolidated Amended Complaint provided scant detail regarding the alleged expense backlog and reserve manipulations which occurred during the Class Period and could not withstand the heightened pleading standards of the Private Securities Litigation Reform Act.

Pomerantz successfully argued that despite the dearth of information provided by the Company regarding these manipulations, these claims should not be dismissed because they were inextricably intertwined with the irrefutable option backdating claims. Magistrate Judge Reyes accepted this argument, finding that "[c]oupled with the detailed allegations of backdated stock options, it is highly plausible that defendants engaged in additional accounting irregularities in order to cover up the backdate options and, in the process drive up Comverse's stock price."

By an Order dated February 19, 2008 Judge Nicholas G. Garaufis denied defendants’ Motions to Dismiss Lead Plaintiffs Consolidated Amended Class Action Complaint. Of particular note was Judge Garaufis’ denial of the Compensation and Audit Committee members’ motions to dismiss. As members of these Committees, these defendants were responsible for administering the Company’s stock option plans and granting its option awards. Lead Plaintiff alleged that during the Class Period, these options awards contained “as of” dates which were backdated to reflect historically low share prices of Comverse stock.

Throughout the Class Period, the Compensation Committee defendants received Comverse stock options and sold Comverse common stock. “As a result,” writes Judge Garaufis in his decision, “they had firsthand knowledge as shareholders of the ups and downs in Comverse’s stock price, which makes it likely that they were aware that the “as of” dates on the unanimous consent forms they signed corresponded to low points in Comverse’s stock price.”

Citing the procedure that a court must follow when faced with a Rule 12(b)(6) motion to dismiss a Section 10(b) action, as established by the Supreme Court in Tellabs, Inv. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (2007), and referencing the “red flags” evident on the face of the unanimous consent forms, as well as the Committee members’ “experience and knowledge,” Judge Garaufis held that the facts alleged by Menorah Group “give rise to a “strong inference” that [the Comverse Directors] acted recklessly – that is, that the danger that they were committing fraud by signing the unanimous consent forms was “so obvious that [they] must have been aware of it.””