The SEC charged three former executives from Comverse Technology with running a 10-year scam involving selectively backdated stock options.

In the scheme, the execs granted themselves and others backdated stock options that profited them to the tune of hundreds of millions of dollars. The Commission’s charges come at the same time that the regulator is pushing for greater disclosure from public companies about their about stock option policies.

The Commission has charged Jacob “Kobi” Alexander, Comverse’s founder and former chairman and CEO, David Kreinberg, the former chief financial officer and William F. Sorin, the former senior general counsel. The complaint alleges that they granted backdated options to coincide with historically low closing prices of Comverse common stock.

Kreinberg and Sorin are also accused of creating a slush fund of backdated options using a list of fictitious employees.

As a result of the scheme, the men realized actual gains of staggering proportions. Alexander picked up nearly $138 million between 1991 and 2001. While Kreinberg took in almost $13 million during the 1994 to 2001 period, while Sorin realized an actual gain of more than $14 million from 1991 to 2001.

In addition to the SEC, the United States Attorney’s Office for the Eastern District of New York and the FBI, were also involved in the case.

“The Justice Department is determined to see that our markets operate fairly and honestly,” said Deputy Attorney General McNulty, in a published report. “Investors take risks and do their best to see into the future when picking companies in which to invest. We cannot allow corporate leaders to operate under different rules, using 20-20 hindsight to line their own pockets. We will continue to pursue misconduct in any boardroom where we find it.”

The SEC claims Alexander used hindsight to pick a date when the closing price of Comverse’s common stock reached or was close to either the quarterly or annual low. He then told Sorin about the date and closing price, and that’s the date he would choose for pricing the options. Then Sorin created false records that claimed the Comverse Board of Directors approved the date that Alexander picked.

The illegal activities began sometime around 1991 and Kreinberg joined in the scheme about seven years later and helped Alexander in selecting backdated grant dates.

The trio created a slush fund between 1999 and 2002, using a list of fictional and real employees who the firm had supposedly granted options to. To keep the fund a secret, Kreinberg had an employee conceal it from auditors.

Last year, the Comverse board launched an investigation into the firm’s grant option program. Kreinberg altered the records in Comverse’s electronic option-tracking system to avoid detection by the investigation. Alexander, Kreinberg, and Sorin also made misrepresentations to Comverse’s auditors in order to conceal the backdating scheme, the SEC charged.

The SEC has just put out its final rule on executive compensation disclosure, which focused on the topic of grant option backdating. According to the rule, firms are now required to not only list the dates options were granted, but they must also include why they were granted and for whom.

Linda Thomsen, director of the Division of Enforcement at the SEC, said the Comverse case demonstrates the need for better disclosure.

“Shareholders have a right to full, complete, and accurate information regarding executive compensation. As alleged, the backdated option grants and secret option slush fund was a deceit of the highest order upon Comverse Technology Inc.’s shareholders,” she said.

The SEC is seeking injunctive relief, civil penalties, disgorgement, with prejudgment interest, and is seeking to bar all the defendants.

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