Outline of Recent SEC Enforcement Actions - the Utah State Bar

• In addition, from 1998 to April 2001 Ulticom improperly deferred to subsequent periods
the recognition of revenues from certain shipments and service contracts between itself
and another subsidiary of Comverse.
Without admitting or denying the allegations of the SEC's Complaint, both Ulticom and
Roberts have consented to the entry of final judgments. The proposed final judgment against
Ulticom would permanently enjoin it from violating Section 17(a) of the Securities Act of 1933
("Securities Act"), Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange
Act of 1934 ("Exchange Act"), and Exchange Act Rules 13a-1, 13a-11, 13a-13, and 14a-9.
The proposed final judgment against Roberts would permanently enjoin her from
violating Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act,
Exchange Act Rules 10b-5, 13b2-1, and 13b2-2, and for aiding and abetting Ulticom's violations
of Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) and Exchange Act Rules
13a-1, 13a-11, 13a-13, and 14a-9. In addition, Roberts has agreed to pay a $25,000 civil
monetary penalty and has consented to a permanent Officer and Director Bar and a 5-year
suspension from appearing or practicing before the SEC as an accountant. .
Comverse
According to the complaint, the first scheme involved improper backdating of Comverse
stock options granted between 1991 and 2001. The SEC alleges:
• Comverse backdated at least 26 stock options grants to employees, to coincide with
historically low closing prices for the Company's common stock.
• Comverse awarded employees these disguised in-the-money options without recording a
corresponding compensation expense for the in-the-money portion of the option grant.
The failure to record the expense did not conform to U.S. GAAP.
• Comverse also made grants to fictitious employees in order to establish an illegal pool of
options thereby creating a slush fund of "in-the-money" stock options to later use in
circumvention of the approved stock option grant process.
Comverse's second alleged fraudulent scheme involved several improper accounting
practices. According to the complaint:
• Comverse improperly built up, and subsequently improperly released, certain reserves to
meet earnings targets, improperly reclassified certain expenses to manipulate other
performance metrics, and made false disclosures about its backlog of sales orders.
• The manipulation of earnings allowed Comverse to meet or exceed Wall Street analysts'
consensus earnings estimates in every quarter between 1996 and the first quarter of 2001.
• As a result of the accounting fraud, Comverse understated its pre-tax income in fiscal
years 1996 through 1999, overstated its pre-tax income in fiscal years 2000 to 2003, and
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