RealTime IT News

Computer Associates Sacks Execs

No stranger to accounting controversy, Computer Associates said late Wednesday it has fired three top company officials for their role in the software firm's ongoing accounting scandal.

CA Chairman Sanjay Kumar said Ira Zar, the company's chief financial officer, along with senior vice president for finance, Lloyd Silverstein and David Rivard, vice president for finance, were all asked to resign, after a preliminary report by an independent auditor revealed their roles in the company's accounting irregularities.

The independent auditors report comes as both the U.S. Attorney General's office and the Securities & Exchange Commission are conducting a joint investigation into whether Computer Associates manipulated its revenue numbers in an effort to pump up the company's stock price.

At issue is whether Computer Associates officials booked and forward-dated customer contracts to improve the company's revenues over a series of fiscal quarters.

The independent audit was conducted by Walter P. Schuetze, and he said some of the company's contracts should have been reflected in the financial statements when they were signed, and not before.

On the conference call Tuesday, Schuetze said his investigation found that CA had "recognized certain revenue prematurely in the fiscal year ending March 31, 2000."

In the aftermath of the disclosures, Douglas Robinson, a senior vice president of finance was named the company's interim chief financial officer.

The revelations are the latest blow to Computer Associates, which has been dogged by accounting irregularity allegations for several years. The news will only provide further evidence for the joint government inquiry, which may take action against the Long Island-based business software company.

While the company is admitting wrongdoing for the first time, it is unclear, whether its disclosures will assist it in mitigating the potential damage from the ongoing government inquiry into the company's improper booking of revenues.

In a conference call on Wednesday night, CA CEO Sanjay Kumar did his best to distance himself from the accounting irregularities, saying the missteps took place in fiscal 2000, and that he took over from retired founder Charles Wang in fiscal 2001. However, while not in charge, Kumar was a top official in the company at the time of the accounting errors.

A recent report in Newsday said that Kumar has retained Robert Fiske, Jr., a former Whitewater special prosecutor, as his personal counsel. The report went onto say that several CA employees have been subpoenaed as part of the government's ongoing investigation of Computer Associates.

It is still unclear whether Computer Associates will restate its earnings for the period which it has recognized improper accounting took place. It also is not known when the joint government inquiry will disclose its findings, or what specific actions it may take against the company.

Following the news of the accounting irregularities, CA's stock price was trading lower on Thursday. The company also reiterated its second quarter earnings estimates and said it would report its financial results on October 22. Analysts are expecting CA to report earnings of 14 cents a share, up from 4 cents for the same period a year ago, according to Thomson First Call.

And more bad news came to Computer Associates Thursday, when Standard & Poor's Rating Services said it has placed the company on its "BBB+" corporate credit and senior unsecured ratings and its "A-2" commercial paper ratings. S&P went onto say it is putting the company on its CreditWatch list "with negative implications," the credit rating group said.

"The action followed the preliminary findings of an independent inquiry conducted by an internal audit committee that the company prematurely booked certain revenue in the fiscal year ended March 2000," S&P said.

"The potential exists for uncovering additional irregularities, restatements of prior period financial statements, and shareholder lawsuits," S&P added.