Former CA Top Salesman Gets 7 Years

Former Computer Associates chief salesman Stephen Richards was sentenced Tuesday to seven years in prison for his role in the company’s financial accounting scandal that cost stockholders $400 million.

In April, Richards pleaded guilty to securities fraud, obstruction of justice and perjury.

The sentencing in U.S. District Judge I. Leo Glasser’s New York courtroom follows the Nov. 2 sentencing of the company’s former CEO, Sanjay Kumar, to 12 years in prison.

The company’s former chief financial officer, general counsel and three additional top financial officers have also taken guilty pleas in the accounting scandal and are awaiting sentencing.

The Islandia, N.Y.-based company, a top maker of enterprise management software, formally changed its name from Computer Associates to CA in the hope of shedding its tainted image.

In his guilty plea, Richards admitted to inflating the company’s quarterly revenue and earnings by keeping open the company’s books longer than allowed by securities law. The maneuver was designed to give the appearance the company was meeting or exceeding its quarterly projections.

In fact, the company was losing money, but the scam – nicknamed the “35-day month” scheme — helped executives earn millions of dollars in bonuses for meeting financial targets.

The scheme led to CA illegally recognizing more than $2 billion in revenue between 1999 and 2000. The company had to eventually restate the earnings at a loss of more than $400 million to shareholders.

Richards also admitted obstructing the government’s investigation by providing false explanations for the fraudulent accounting practices to the company’s lawyers. The lawyers, in turn, passed on the false explanations to federal investigators.

The company itself avoided criminal charges by establishing a $225 million shareholder restitution fund and cooperating with the federal investigation.

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