The Past Is Prologue
October 7 2008 by Joe Queenan
Two years ago, Jacob Alexander, one-time chief executive of Comverse Technology, fled to Namibia rather than face charges that he conspired to backdate stock options. If convicted of all 35 counts, Alexander could get sent to the slammer for 25 years. At present, the U.S. government is seeking to extradite its quarry from his base in Southwest Africa. According to the The Wall Street Journal, the lawyer who is prosecuting the extradition case “is still researching whether backdating stock options is a crime in Namibia, a legal issue the case could turn on.”
I don’t know a whole lot about the Namibian jurisprudence system and I don’t know how aggressively the Namibian Securities & Exchange Commission goes after executives suspected of backdating stock options. But I’m going to go out on a limb and theorize that backdating stock options is probably not greeted with the universal horror that it is on this side of the Atlantic. I will further theorize that the unlikelihood of being prosecuted in Namibia for backdating stock options may be one of the reasons Alexander chose to settle there, as, from the quality of life point of view, Rio de Janeiro or Lucerne would have been a more obvious choice. I am not categorically asserting that Alexander will never be extradited from his current home for crimes he may have committed in this country. I am merely suggesting that if he does get booted out by the authorities, the intricacies of stock option dating probably won’t come into play to any great degree.
Namibian option-dating strictures fall into a broad category best described as “Crimes We Suspect Are Not Taken Terribly, Terribly Seriously in Certain Countries.” For example, I am willing to bet that naked short-selling is not all that big a deal in the Sudan and that trading on inside information probably goes on with some regularity in Paraguay. Front-running is probably not as serious a crime in Zimbabwe or Serbia as it is in the U.S., and talking with the press during the “quiet period” preceding an initial public offering probably occurs more often in Uzbekistan than it does on these shores.
The thing I liked about the Journal’s treatment of the Alexander case was how the reporter managed to be respectful toward the Namibian legal system while at the same time hinting to readers that not every society has the same attitude toward backdating stock options as this one does. “Other countries, other customs,” the wise man once said, and boy was he ever on the money. For example, in many parts of the world, the earnings guidance provided to analysts before the official numbers are released each quarter must be taken with a grain of salt. I for one would be very suspicious of any earnings predictions coming out of Caracas. I just would. For similar reasons, I would never make an investing decision based on data provided by Cayman Island interest rate forecasters. It’s not that I don’t trust these people; it’s just that in certain countries, a certain mathematical elasticity comes into play whenever numbers are involved. That’s why I always turn down those telemarketers pitching variable annuities backed by the full faith of the Nigerian government. I’m just naturally gun-shy.To better understand this issue, it is useful to examine how other relatively common legal infractions are viewed in other nations. Changing lanes without using one’s turn signals is apparently quite common in certain parts of the Third World. So is driving with a muffler that fails to comply with Kyoto Treaty protocols. Zoning laws are much laxer in Siberia than they are in the U.S., and hate laws apparently do not exist in many parts of rural Afghanistan. The world is a big place, and every country has its own idiosyncrasies. Capricious homicide is frowned upon in most societies, as is arson. Tailgating is not as big a deal in Italy as it is here, and talking on one’s cell phone while driving rarely results in a traffic ticket in Somalia. That’s why I’m willing to bet that, before bolting the U.S., Mr. Alexander Googled “Namibia & Backdating Stock Options,” didn’t come up with anything too worrisome, and high-tailed it out of town. It’s only a theory, but I think it’s a pretty good one.