Former CA CEO Indicted

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UPDATED: The Department of Justice (DoJ), FBI and U.S. Attorney’s Office handed down a 10-count
indictment against former Computer Associates (CA) chairman and CEO Sanjay Kumar and Stephen
Richards, former CA head of worldwide sales.

Both were charged with securities fraud conspiracy, obstruction of justice
and conspiracy to obstruct justice. Kumar was additionally charged
with making false statements to law enforcement officers, while Richards was
additionally charged with perjury. Also, former CA
general counsel Stephen Woghin pled guilty to securities fraud conspiracy
and obstruction of justice.

“The defendants are accused of perpetuating a massive accounting fraud that
cost public investors hundreds of millions of dollars when it collapsed,
then they allegedly tried to cover up their crimes by lying,” deputy
attorney general James Comey said in a statement. “If proven true, such
conduct cannot be tolerated, and the Corporate Fraud Task Force’s track
record shows that it will be met with severe penalties.”

Kumar stepped down
as CEO in April, though he continued to have a role with CA as chief software architect. In June, he
quit CA entirely.

CA has been scrambling for months to get its name out of the spotlight
following the first reports of its financial accounting juggling act — the
infamous “35-day month” scheme, which strengthens the previous month’s
revenue figures at the expense of future earnings reports.

Kenneth Cron, CA’s interim CEO, helmed the company’s $2.2 billion restatement
in April and subsequent $9 million adjustment
a month later, while trying to forge a deal between the
company and federal prosecutors.

In related news, CA has also struck a deal with the U.S.
Attorney’s Office to avoid a court appearance
over its accounting problems, officials confirmed Wednesday.

According to a statement issued by the DoJ,
under the terms of the agreement, CA will shell out $225 million to compensate
shareholders for any losses resulting from the
“company’s criminal conduct.” Also, CA has agreed to comply with “numerous
remedial steps undertaken to ensure that the fraud at CA does not recur,” the
statement continued.

The U.S. Attorney’s Office agreed not to prosecute CA, but rather will appoint
an “independent examiner” to oversee CA’s compliance of the agreement. “However,”
the statement continued, “should CA violate the terms of the
agreement executed today, or commit any other crimes, it shall be subject to
prosecution, including prosecution for the fraud that is the subject of the
indictment.”

“This represents a critical step in closing a deeply troubling chapter in
our company’s history,” said Lewis Ranieri, CA chairman of the board, in a
press conference Wednesday afternoon. “CA accepts responsibility for the
improper accounting practices and mis-statements of revenue from Jan. 1,
1998 through Sept. 30, 2000.

“This conduct was wrong, I want to be very clear on this point,” he
continued. “We fully support the government’s effort to bring wrongdoers to
justice.”

The Islandia, N.Y., company has been under intense scrutiny from prosecutors
and the Securities & Exchange Commission (SEC) recently for covering up
irregularities reported in its financial statements.