NEW YORK, September 23 2004
Reuters
Former Computer Associates International Inc chief executive Sanjay
Kumar was charged on Wednesday with securities fraud and obstruction
of justice stemming from a two-year investigation of improper accounting
at the software maker.
The company itself cut a deal with regulators on Wednesday promising
to pay $225 million to shareholders to settle federal accounting fraud
charges, as the government accused it of improperly booking $2.2 billion
in revenues.
A federal court, which heard a guilty plea from a former CA officer
on Wednesday, approved an agreement the could mean the company avoids
prosecution. It is allowing CA 18 months to pay the fine and put a number
of remedial policies in place.
Kumar and former global sales chief Stephen Richards were charged in
a 10-count indictment that was returned by a grand jury last Friday
and unsealed on Wednesday. The charges include securities fraud, conspiracy
and obstruction of justice.
Richards was also charged with one count of perjury, while Kumar was
charged with one count of making false statements to law enforcement
officers.
Kumar's attorneys said in a statement that he "denies any wrongdoing
and expects to be exonerated of all charges." Richards' lawyers
said the government "overreached" as he was not responsible
for determining "when revenue was recognized." The US Securities
and Exchange Commission (SEC) also filed securities fraud charges against
the company, Kumar, Richards, and former general counsel Stephen Woghin.
"Computer Associates, through former executives Kumar, Richards,
Woghin and others, obstructed the SEC's investigation into the company's
accounting practices," the SEC said in a statement. It also described
how the fraud was conducted.
"Like a team that plays on after the final whistle has blown,
Computer Associates kept scoring until it had all the points it needed
to make every quarter look like a win," said director of the SEC's
northeast regional office, Mark Schonfeld.
Former general counsel Woghin pleaded guilty to securities fraud conspiracy
and obstruction of justice on Wednesday. He agreed to be barred from
working as an officer or director of a public company and could also
have to make a payment later.
BILLION-DOLLAR BONUS
Kumar, who joined Computer Associates in 1987 and was promoted to CEO
in 2000, stepped down as CEO in April and severed all ties with the
company in June. He had shared a $1 billion performance-based stock
award with two other executives months before CA stock dived after a
profit warning.
Computer Associates said on Wednesday that it is working with the government
to try to get back money former officers received related to wrongdoing.
CA, which acknowledged it violated the law, has agreed to make a number
of changes, including reorganizing the finance department and appointing
two new independent directors to ensure that two thirds of its board
are independent members.
"This conduct was wrong. I want to be very clear on this point:
We fully support the government's efforts to bring wrongdoers to justice,"
Computer Associates chairman Lewis Rainieri said on a call with investors.
During the call Computer Associates said it would take a $215 million
pretax charge in its fiscal second quarter partly covering the $225
million payment that will go to shareholders. It already booked a related
charge for $10 million. It said it believes most of the payments are
tax deductible.
The Islandia, New York-based company said it hopes to be able to appoint
a permanent CEO "very shortly." Kenneth Cron has been acting
as interim CEO.
The company's former chief financial officer and three other former
top finance executives have pleaded guilty to criminal charges and await
sentencing. More than 15 executives and employees have have left the
company in the last year due to the investigation