CA against Wang

Charles Wang, the co-founder and former chairman of Computer Associates, directed and participated in the massive $2.2-billion accounting fraud at the company, according to a blistering report issued late Friday by a committee of outside directors of the company now known as CA.

The report said the company should pursue civil actions for damages of $500 million against Wang and a small circle of former executives around him, claiming they were responsible for fraudulently inflating the company's profit margin to artificially raise the price of the company's stock.

The report also calls for Wang to repay the hundreds of millions of dollars in company stock he received through his management of the company.

The report, filed in Delaware, was prepared at the request of the CA board in answer to civil lawsuits in Delaware and in U.S. District Court in Central Islip against the company, and many of its directors and officers, seeking damages for stock fraud.

In addition to calling for the company to bring a civil suit against Wang, the report has another purpose. It amounts to a legal brief by the current officials of the company, arguing that the only people who should be held liable for damages in the civil suits are Wang and the circle of executives around him. Those executives include his longtime protege Sanjay Kumar, who recently was sentenced to 12 years in prison for involvement in the scheme.

The essence of the fraud was the so-called 35-day month in which the company would backdate some sales made in one month to the previous month to match the expectations of Wall Street analysts, the report said, linking the practice to Wang.

In a rare public statement, Wang said he was "appalled" by the report. "This fallacious report does not serve the best interest of shareholders, customers and employees," he said.

Suggesting the report was based at least in part on information from Kumar, Wang said he found it "hard to understand how the special litigation committee could believe the information they were given was credible, when their sources are those who perpetrated the crimes at issue and then lied about them to both internal company investigators and the government."

Sources familiar with the criminal investigation into the company by the federal government have said that whatever went on at the company, there was never any evidence to bring an indictment against Wang.

The committee's report said it "has uncovered credible and corroborated evidence that Mr. Wang both directed and participated in the 35-day month practice by ... instructing subordinates ... to obtain additional revenues after the closes of quarters to be counted in the prior quarter in order to meet analysts' expectations and ... negotiating and participating in deals he knew to be backdated."

"Indeed, it is the view that Mr. Wang was the direct cause of the 35-day month practice, both due to his actual conduct and the culture that he established, and that it existed for most, if not all, of his tenure as CEO," the report said.

Wang, who co-founded the company in 1976, left it in 2002.

The report portrays a company that for most of its history, according to one unnamed source, operated "as if he were running it out of his garage." In addition, Wang was assailed for establishing a "culture of fear" that brooked no dissent and in which inexperienced people were promoted to positions for which they were not qualified.

The report found the five outside directors of the company at the time of the fraud were unaware of the illegal actions and shouldn't be held liable, including former New York Stock Exchange president Richard Grasso, ex-Sen. Alfonse D'Amato, and current Stony Brook University head, Shirley Strum Kenny.

Wang for the first time acknowledged that during the probe he met with lawyers hired by CA and he said he "fully cooperated with the U.S. government at all stages."

More fundamentally, Wang said, "As the founder of CA, I am devastated by what has happened to the company and feel personally wronged by Sanjay Kumar and the management team he installed."

Meanwhile, dissident shareholder Sam Wyly celebrated. "It's a great day for us," said William Brewer, a lawyer for Wyly. "How do you say, I told you so."


tHIS IS ONE REASE WHY CA OUTSOURCEING BUT WHY SHOULD I THE ONE THAT NOTHING TO DO WITH THERE GREAD TO LOSE A JOB I WORKED SO HARD TO MAKE THIS COMPANY GET OUT OF TRUBLE ? I AM SO GLAD THIS GOING TO HAPPEN NOW " WHO WANTS TO WORK FOR A COMPANY THAT SO EVIL AND GREADY AS CA !! THIS COMPANY WILL FALL DON'T BY CA STOCK YOU WILL LOSE YOUR MONEY LIKE i DID !!

we at CA thanks Sanjay Kumar for f$%k us all !

Computer Associates Ex-CEO Pleads Guilty to Business Fraud
by The Associated Press4/25/2006 —

Sanjay Kumar, the former CEO of Computer Associates International Inc., pleaded guilty on Monday to obstruction of justice and securities fraud charges in a massive accounting scandal at the Long Island-based software company.

According to a 2004 indictment, Kumar was so involved with adding false revenue to a financial quarter even after it closed that he flew on a corporate jet to Paris in July 1999 to finalize a $19 million deal and signed a contract that had been backdated.

The indictment also charged that executives instructed salespeople to complete deals after the quarter had closed -- a practice known within the company as the "35-day month" -- and "cleaned up" contracts by removing time stamps from faxes.

"Your honor, my conduct was wrong. I take responsibility for participating in this practice, and I apologize for my actions," Kumar told the judge, referring to the accounting fraud.

The company's former head of worldwide sales, Stephen Richards, pleaded guilty to the same charges in federal court in Brooklyn. He and Kumar left the courthouse without speaking to reporters.

The guilty pleas "are a culmination of the government's successful investigation into a culture of corruption and fraud at Computer Associates," U.S. Attorney Roslynn Mauskopf said in a statement.

Five other top executives had previously pleaded guilty.

Kumar, 44, and Richards, 41, remain free on $5 million bond while awaiting their Sept. 12 sentencing. The law allows a maximum sentence of 20 years in prison for the offenses, but the term could be substantially less under federal sentencing guidelines.

Kumar also is a co-owner of the New York Islanders hockey team.

Computer Associates, which makes software and storage systems for large corporations, agreed in 2004 to pay $225 million to shareholders in a settlement letting it defer criminal prosecution. An outside monitor is tracking its financial reporting, and the company is reviewing past financial filings. Computer Associates would face no prosecution if it follows terms of the deferral agreement for 18 months.

Computer Associates restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked.

During the company's fiscal year 2000, it "prematurely recognized" more than $1.4 billion in revenue from at least 116 contracts that had not yet been signed, the Securities and Exchange Commission said.

The Islandia, N.Y.-based company has said it had billions of dollars in annual revenue in the late 1990s. Reported revenues plunged after the company changed its accounting practices in the face of increased outside scrutiny.

After the FBI began investigating the company in 2002, Kumar and Richards orchestrated a cover-up that involved lying under oath about the "35-day month" and other frauds and trying to buy the silence of a potential witness, authorities said.

You can contact The about "Computer Associates Ex-CEO Pleads Guilty to Business Fraud" at editor@redmondmag.com.