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Former CA chief Kumar indicted as firm coughs up $225m

Could face 100 years behind bars

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Former Computer Associates chief Sanjay Kumar has been hit with charges of securities fraud, obstruction of justice and conspiracy by the US DoJ (Department of Justice) - a result of the company's long-running accounting scandal.

The Feds today unsealed the charges, which were initially handed down last week by a federal grand jury in New York. Kumar was additionally slapped with one count of perjury and one count of making false statements to law enforcement officers. Former CA Head of Sales Stephen Richards was also charged with securities fraud conspiracy and obstruction of justice.

"The defendants are accused of perpetrating 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,” said Deputy Attorney General Comey, who chairs the President’s Corporate Fraud Task Force. “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.”

CA today agreed to shell out $225m to pay back victims of the fraud. The US Attorney's Office has agreed not to prosecute CA, if it follows an agreement laid down by the office. CA's financial results will be watched by an outside monitor for the next 18 months. The software maker had once offered up $10m to settle the investigation into its accounting practices. Bit short; it seems.

Along with today's charges, Stephen Woghin, CA's former general counsel, pleaded guilty to securities fraud conspiracy and obstruction of justice charges.

Kumar and Richards are accused of engineering what has now become infamously known as the "35-day month" accounting scheme. This plan would see CA allegedly count revenue on the books before deals had actually been closed. CA has chalked up $2.2bn in premature revenuelation so far.

"The indictment alleges that on Oct. 23, 2003, Richards perjured himself while testifying under oath before the SEC by attempting to conceal the existence of the 35-day month practice and his involvement in it," the DoJ said. "The indictment also alleges that Kumar, in an interview with the FBI and the U.S. Attorney’s Office on Nov. 5, 2003, made materially false statements to conceal the same scheme and his involvement in it."

Both former executives could face prison sentences up to 100 years, if convicted on all counts.

“With these agreements, CA has taken a critical step in closing this deeply troubling chapter in its history,” said CA Chairman Lewis Ranieri. “On behalf of the company and all its employees, we tender our sincere apologies to our shareholders and customers.

“Some former members of CA’s management engaged in illegal activity,” Ranieri said. “Violations of law and ethical standards, including securities fraud, obstructing a government investigation, and lying to CA’s Board of Directors and CA’s lawyers cannot be condoned. We fully support the government’s efforts to bring all responsible parties to justice."

Kumar initially stepped down from the CEO and Chairman's positions to take on a software chief role at CA after the conclusion of an SEC investigation into the company's practices. He then decided it was best to leave CA all together. ®

Related stories

Former CA boss Kumar exits stage left
CA 2003 results delayed
CA puts 35-day month and $2.2bn in revenue behind it
Man overboard! CA chief Kumar walks plank...
CA makes nine workers remedial
CA faces SEC action

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