Multi-Industry Chief Compliance and Ethics Officers

June 27, 2012 Earlier today, the U.S. Attorney’s Office for the Eastern District of New York filed a criminal complaint against FalconStor Software, Inc. (“FalconStor”) alleging that the company conspired to pay more than $300,000 in bribes to executives of J.P. Morgan Chase Bank, N.A. (“J.P. Morgan Chase”) to obtain over $12 million in electronic storage licencing contracts. FalconStor was also charged with conspiring to falsify its corporate books and records to cover up the bribery scheme. Also this morning, FalconStor entered into a deferred prosecution agreement with the U.S. Attorney’s Office in which FalconStor admitted the allegations in the complaint and agreed to forfeit to the United States $2.9 million. The United States Securities and Exchange Commission also filed a civil enforcement action against FalconStor and a proposed final judgment on consent in which FalconStor agreed to pay an additional $2.9 million in civil penalties.

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