Former CA Chief Pleads Guilty In Fraud Case
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Sanjay Kumar, former CEO of Computer Associates International, pleaded guilty yesterday to charges of securities fraud and obstruction of justice.
Kumar and Stephen Richards, CA's former head of worldwide sales, both pleaded guilty to the charges after being named in a nine-count indictment in September 2004. The charges also included conspiracy to obstruct justice, perjury and making false statements to federal investigators.
The indictment charged that Kumar and Richards were directly involved in a scheme to falsely inflate the company's quarterly earnings by backdating contracts. Kumar was said to be so involved that in 1999 he flew to Paris to finalise a deal and personally signed a backdated contract.
Four other former CA executives have already pleaded guilty to to other unspecified charges as part of the case against CA. That case, settled in September, requires the payment of $225m in to a restitution fund by CA to compensate investors, as well as the integration of complex financial controls, themselves rumoured to be costing in the region of $100m to implement.
The charges against Kumar and Richards could net them up to 20 years in prison although that is expected to be reduced on account of their guilty pleas. Sentencing is scheduled for September 12th.
In total $2.2bn of Computer Associates' revenues was deliberately misstated to prop up it's stock price and meet analyst expectations.
The more flagrant examples of the fraud, listed as evidence, include a $44.5m deal with an all but insolvent customer, backdating the contract and then when the contract didn't materialise, although the revenue was reversed in internal records, it wasn't publicly restated. Kumar was also accused of authorising a $3.7m consultancy contract as "hush money" for an executive of a CA customer who threatened to blow the whistle on the accounting irregularities.
CA has stated that it has made significant inroads in implementing the new accounting processes and that it is a "dramatically different organization" than when Kumar and Richards left. Current CEO John Swainson, who joined from IBM in 2004, has by all accounts been doing a good job turning things around, with customer confidence returning after a year of uncertainty.
Ethical Dilemma - Would You Shop Your Best Mate ?
The indictment charged that Kumar and Richards were directly involved in a scheme to falsely inflate the company's quarterly earnings by backdating contracts. Kumar was said to be so involved that in 1999 he flew to Paris to finalise a deal and personally signed a backdated contract.
Four other former CA executives have already pleaded guilty to to other unspecified charges as part of the case against CA. That case, settled in September, requires the payment of $225m in to a restitution fund by CA to compensate investors, as well as the integration of complex financial controls, themselves rumoured to be costing in the region of $100m to implement.
The charges against Kumar and Richards could net them up to 20 years in prison although that is expected to be reduced on account of their guilty pleas. Sentencing is scheduled for September 12th.
In total $2.2bn of Computer Associates' revenues was deliberately misstated to prop up it's stock price and meet analyst expectations.
The more flagrant examples of the fraud, listed as evidence, include a $44.5m deal with an all but insolvent customer, backdating the contract and then when the contract didn't materialise, although the revenue was reversed in internal records, it wasn't publicly restated. Kumar was also accused of authorising a $3.7m consultancy contract as "hush money" for an executive of a CA customer who threatened to blow the whistle on the accounting irregularities.
CA has stated that it has made significant inroads in implementing the new accounting processes and that it is a "dramatically different organization" than when Kumar and Richards left. Current CEO John Swainson, who joined from IBM in 2004, has by all accounts been doing a good job turning things around, with customer confidence returning after a year of uncertainty.
Ethical Dilemma - Would You Shop Your Best Mate ?
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