Former CA Chief on The Hook For $52M
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Former CA CEO Sanjay Kumar agreed today to pay $52 million in restitution as part of his guilty plea to securities fraud and obstruction of justice. Kumar was convicted last year of inflating CA's (formerly Computer Associates) quarterly revenue and earnings to hide actual losses.
U.S. District Judge I. Leo Glasser ordered Kumar to pay $40 million by the end of the month, $10 million by the end of July and the final $2 million by the end of next year. CA has already paid $225 million into the fund.
Upon Kumar's release from federal prison in 2019, he will be required to pay 20 percent of his income into the restitution fund. Glasser also directed that Kumar's $8 million criminal fine be directed to the restitution fund.
The restitution settlement is the final step before the 45-year-old Kumar begins a 12-year prison sentence.
At the heart of Kumar's accounting scheme was what became known as the 35-day month in which CA kept its books open longer than allowed by law. The scheme led CA to prematurely recognize more than $2 billion in revenue between 1999 and 2000. Ultimately, CA had to restate its earnings at a loss of more than $400 million to shareholders.
Kumar is also facing a civil lawsuit filed by CA. The company is seeking to recover the $14.9 million it spent defending Kumar. The New York Supreme Court allowed CA to claim Kumar's home and other assets as security. In addition to Kumar's home, the former executive's assets include a 57-foot Azimu yacht, two Ferraris, a Land Rover and a Volvo.
The court also took $9 million Kumar was owed by his predecessor and CA founder Charles Wang. This sum was a payment for a stake that Kumar owned in the New York Islanders hockey team.
In addition to the 35-day accounting month, Kumar admitted at his criminal trial he obstructed the government's investigation and directed CA employees to provide false explanations for the company's accounting practices. Kumar also tampered with a laptop to conceal its contents from federal investigators and CA's own audit team.
Stephen Richards, CA's former head of worldwide sales, also pleaded guilty to securities fraud, obstruction of justice and perjury. CA's CFO, general counsel and three other officers also took various guilty pleas for their participation in the accounting manipulations.
The company itself avoided criminal charges by establishing the restitution fund and cooperating with federal investigators.