RealTime IT News

Former CA CEO Kumar Pleads Guilty

Former CA CEO Sanjay Kumar pleaded guilty to fraud Monday, owning up to his role in one of the most storied accounting scandals in high-tech history.

Kumar, along with Stephen Richards, CA's former head of worldwide sales, plead guilty to securities fraud, obstruction of justice and perjury at a hearing with Judge I. Leo Glasser at the U.S. Attorney's office in Brooklyn, N.Y.

Amy Walsh, a representative for that office, confirmed that Glasser accepted both pleas on a "factual basis." She said Kumar and Richards will next appear in court for sentencing on September 12.

The plea was the latest step since both men were indicted in September 2004 for tweaking CA's financial numbers.

Kumar was additionally charged with making false statements to law enforcement officers, while Richards was additionally charged with perjury. Former CA general counsel Stephen Woghin plead 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," said deputy attorney general James Comey, at the indictment.

In an effort to boost earnings to meet financial analysts' expectations, Kumar and Richards changed the dates on business contracts, which resulted in misstating CA's revenues by more than $2 billion.

Kumar's scam, nicknamed the "35-day month" scheme, helped executives reap millions of dollars in bonuses for meeting financial targets.

Kumar stepped down as CEO in April, though he continued to have a role with CA as chief software architect. In June, he quit CA entirely.

Kenneth Cron, then CA's interim CEO, helmed the company's $2.2 billion restatement in April 2004 and subsequent $9 million adjustment a month later, while trying to forge a deal between the company and federal prosecutors.

CA, a top maker of management software to help computer systems remain up and running with minimal manual interaction, has been on the rebound ever since.

The Islandia, N.Y., company formally changed its name from Computer Associates to CA in the hope of shedding its tainted image.

CA hired former IBM executive John Swainson as CEO and has made several purchases to boost the company's market position.

CA lost CFO Jeff Clarke to Cendant last week.

Separately, Swainson said in a statement today that revenues for the fourth quarter will be between $940 million and $950 million, compared to the company's previous guidance of $975 million to $1 billion.