Feds, CA Add More Charges

Software maker Computer Associates filed a delayed annual report Wednesday with the Securities and Exchange Commission, admitting two material weaknesses in its previous financial reporting.

The latest accounting disclosures came as the U.S. government filed an amended indictment against former CA boss Sanjay Kumar, accusing him of paying $3.7 million to a vendor who threatened to tell investigators about the company’s improper accounting.

Kumar, who was the CEO from 2000 to 2004 before he was ousted amid the then-widening accounting scandal, and Stephen Richards, Computer Associate’s former head of world-wide sales, were handed a superseding indictment yesterday from the U.S. attorney for the Eastern District of New York.

The indictment claims new evidence of fraudulent accounting and obstruction of justice. The previous charges claim the men used a “35-day month” at the end of each quarter to change contracts to count in the previous period.

The new indictment also claims that in 1999, Kumar instructed a CA employee to close a deal for $44.5 million in software to vendor and later told the company “not to worry” if it was unable to pay. Regulators said the practice inflated company revenue.

CA’s current filing with the SEC, which includes restatements of results for fiscal years 2001 through 2005, underlines the company’s ongoing efforts to clean up the past accounting problems that got it into hot water with regulators in the first place.

CA Chief Financial Officer Bob Davis said once the company identified the control deficiencies, it “acted swiftly and decisively to implement the changes necessary to correct the problems.

“We have made substantial progress and will work diligently over the coming months to complete the task,” he said.

In a statement, CA President and CEO John Swainson said: “While the financial impact of the adjustments in FY 2005 and restatement of prior years involves relatively minor amounts in any particular year, it is important for CA to make those changes.

“We approached our Sarbanes-Oxley efforts in the same spirit, with the intention of making CA a better company. We are committed to the highest standards of financial reporting and fiscal transparency,” he said, referring to the federal law governing how public companyis track their internal auditing and data retention systems.

CA said material weaknesses were a result of a deficiency in maintaining an effective control environment in its Europe, Middle East and Africa operation.

Delivering a keynote speech yesterday at the C3 Corporate and Channel Computing Expo in New York, the chief operating officer of the Islandia, N.Y.-based company stuck to the same theme regarding the Sarbanes-Oxley regulation. It’s an “ambitious goal, said Jeff Clarke, as well are other recent government regulations, including HIPPA, the act governing how health care providers maintain patient information. But they have “ushered in a new regulatory environment in which business everywhere must come to grips with,” he added.

“As a result, people at every level of an organization, from administrative assistants to CEOs, every aspect of business has been effected by the regulatory environment.”