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."
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.