09 August 2006

The Web
Business Today

US attorney files charges against Verint’s big daddy

Matthew Vella

Trouble is brewing for the parent company of Verint, the Israeli spy firm which will provide the Malta Security Services with a unified legal interception system which will allow it to intercept all emails, mobile telephone calls and VoIP calls over the internet from a single site operated by the MSS.
Following a stock option probe, the US Attorney’s office in Brooklyn, New York is preparing charges against Comverse executives, the New York Times has reported.
The writ was filed a day after Comverse’s founder, chairman and CEO, Kobi Alexander, resigned along with two other officials, finance chief David Kreinberg and general counsel William Sorin.
Comverse is the parent company of Verint, a NY-based telecommunications company which has been chosen by the Malta Communications Authority to provide a unified legal interception system for the Malta Security Services.
Comverse said in April it would have to restate its accounts back to 2001 after a committee of outside directors found the dates of stock-option grants may have been inaccurate.
At the time, the Wall Street Journal said that Alexander received “many” such grants – seven grants in total between 1994 and 2001, which preceded double-digit run-ups in the company’s share price over the following 20 trading days.
According to the Wall Street Journal, the pattern has raised questions as to whether the grants were approved at a different time and backdated to take advantage of the stock movement.
Meanwhile, in Malta the Malta Communications Authority are now facing legal steps from Italian company RCS over the authority’s decision to award a contract for eavesdropping technology to Israeli company Verint. RCS claims the authority refused it the right to appeal the decision, claiming the award of the contract was not bound by public procurement regulations since the contract was issued by the security services.
But RCS says tenderers had never been informed of a “dispensation” that exempted the contract from public procurement laws. In fact, the MCA only signed a memorandum of understanding with the MSS on 5 January 2006 – a week after rejecting RCS’s offer.
The MSS is afforded special powers by law including the right to spend money without having to account for its expenditure.
RCS is suing the communications regulator claiming its decision was illegal and discriminatory, and its defence counsels have requested that the MCA’s legal representative David Gonzi and his wife Melanie Gonzi Balzan Demajo, who allegedly offered consultancy services to Verint, to appear in court as witnesses. Joe Demajo, from the Demajo Group, is also being asked to testify on the firm’s relations with Verint. Melanie Gonzi Balzan Demajo is the company secretary of Computer Solutions, a Demajo company, which was present for the vendor briefing sessions organised by the MCA on the legal interception system.

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