(November 1, 2004)
A new “Forum”
program for shareholders of Computer Associates International, Inc.
(“CA”) is being initiated in 2004 to address essentially the same
issue that concerned participants in the 2001 CA Forum: eliminating a
substantial stock price discount associated with corporate governance
conditions. The current Forum’s objective is to support effective
shareholder oversight of the actions required to achieve that value
enhancement within a year.
Conditions Impairing Value
pricing of CA stock at the end of October 2004 was discounted more than
30% below the $40+ price range that would be realizable if CA were
valued at the average ratios for its industry.
Most or all of this discount may be attributable to the following risk
– After years of public controversies about compensation and accounting
issues, the Department of Justice and SEC brought criminal fraud and
obstruction charges against seven top executives, including the CEO, and
imposed a Deferred Prosecution Agreement on the company requiring
corporate reforms within 18 months.
– Although the company’s auditors and regulatory agencies are satisfied
that fraudulent financial statements have been corrected, professional
securities analysts continue to find the current form of company reports
difficult to understand.
– Most of the top level of executives were dismissed or resigned in
relation to the corruption investigations, and the company is currently
operating without a permanent CEO or CFO.
must of course rely upon the company’s board of directors to establish
at least acceptable standards and average values, either (a) by
developing a new management team that can make the required changes or
(b) by selling the business to a company with existing management
resources to assure viable operations. Forum attention will therefore
be focused on the information needed by shareholders to responsibly
select and monitor the directors. Subjects of review are expected to
past performance of each
incumbent director standing for re-election in 2005;
shareholder nominations of
qualifications of all
candidates for election to the board;
qualifications of the
company’s auditor; and
liability claims against
directors for unjustified compensation or the costs incurred by the
company for shareholder claims and the September 2004 Deferred
To address these
and other issues that may be defined, the Forum will conduct a variety
of activities to provide investors with the kind of access to
information and free exchange of views that might be sought at a
traditional shareholders meeting, but with independent control of the
process and continuous operation until shareholder interests are
resolved. CA’s management will be invited to support the Forum, and it
is hoped that the responses of the company’s directors and
representatives will permit cooperative communication for the benefit of
all decision-makers. However, even in the absence of management
participation beyond obligatory responses to shareholder requests, the
Forum may conduct board inquiries, panel reviews, professional
workshops, shareholder surveys, open meetings or other activities as
required to produce the information investors need for their evaluations
and decisions, and also to present management with information they need
to consider in the performance of their duties to shareholders.
Participation in the Forum will be open
to all CA shareholders and any professionals concerned with their
decisions, without charge, according to standard Forum conditions.
Investors with sufficient interests in CA will be encouraged to consider
additional participation in advisory panels to help define the issues
addressed by the Forum. All participants are expected to make
independent use of information obtained through the Forum, and Forum
participation will be considered private unless the party specifically
The Forum will
be managed by Gary Lutin, the investment banker who conducted the 2001
CA Forum as well as the forum programs to resolve investor interests in
public demonstration cases regarding Amazon.com, Chesapeake-Shorewood
Packaging, Crowley Maritime, Dun & Bradstreet, Farmer Bros., Lone Star
Steakhouse, National Presto, and Willamette Industries.
Professionals with relevant expertise may be engaged for services or
advice as required to support the evolving information needs of Forum
November 1, 2004
For Pending Forum Activities,
to Remove DIRECTORS
Current News Reports
September 10, 2008
"10 keep positions on
September 3, 2008
"Former CA chief
accuses D'Amato, Ranieri of cover-up"
Wall Street Journal
December 20, 2007 Newsday:
"Some CA shareholders ordered to return payments"
December 20, 2007 Wall
Investors Received Too Much. Doh!"
August 23, 2007 Newsday:
"D'Amato, 11 others re-elected at CA"
13, 2007 Newsday:
"Firm opposes D'Amato re-election to CA board"
9, 2007 Newsday:
shareholders advised to vote against D'Amato"
July 18, 2007 Newsday:
"Top CA Inc. execs take home more than $23 million"
June 14, 2007 Newsday:
chairman steps down"
22, 2007 Newsday:
"Criminal case against CA ends"
April 15, 2007
April 13, 2007 New York Times:
"Ex-Executive Agrees to Pay $800 Million in Restitution"
March 12, 2007 Newsday:
"Poker expert folds chunk of CA shares"
February 25, 2007 Newsday:
"Ethics commission will review Kenny's role on board"
"How lucrative relationship developed | College president
who also served as a director of CA defends dual roles and
denies any conflict of interest"
February 20, 2007 Newsday:
dissident to get settlement data"
January 30, 2007 Newsday:
begins rebranding as rumors swirl"
January 17, 2007 Bloomberg:
"CA Inc.'s Shareholders Say Ex-Chief Should Pay Software
17, 2006 Wall Street Journal:
Ex-CEO To Recoup Legal Fee"
November 14, 2006 TheStreet.com:
Shareholder Unwinds Stake"
Wall Street Journal:
CA Chief Is Sentenced To 12-Year Prison Term, Fined"
October 16, 2006 TheStreet.com:
"CA Adopts Poison Pill Plan"
September 19, 2006 Newsday:
wants funds from ex-execs | Recovery of millions among
software company's goals as shareholders re-elect 11
directors, including embattled D'Amato"
September 8, 2006 Newsday:
August 1, 2006 Newsday:
explains its errors in report | LI software giant lists
mistakes in latest financial statement, separately says
board member to depart"
August 9, 2006 Newsday:
"CA needs 2nd extension |
Islandia software giant asks SEC for five extra days to
report results for first quarter due to internal review"
June 29, 2006 TheStreet.com:
"CA Hits Targets, Delays 10-K"
June 22, 2006 Newsday:
"Ex-CA exec guilty in hush-money plot"
June 15, 2006 Newsday:
asking SEC for extension | Software company needs more time
to ready financial statements for its annual report; chief
tech officer expected to be named soon"
2006 Wall Street Journal:
Global Sales Chief Becomes
The Latest Executive to Depart | Company Has No Plans To
Fill Corgan's Position; Commissions Issue Simmers"
June 2, 2006
cuts workers' extra 401(k) pay"
May 30, 2006
"CA delays earnings,
sees quarterly loss"
May 16, 2006
"CA finance execs
make an exit | Latest resignations at embattled software
maker comes on heels of a 4Q revenue slide, 2 top-level
May 15, 2006 The
"CA faces executive
May 11, 2006
"Another top exec
leaves CA | Second high-level official to depart; software
company sees no connection with financial woes"
April 25, 2006 New
Admits to Guilt in Fraud Case"
April 24, 2006
"Former CA Chief
Expected to Plead Guilty"
April 13, 2006 Newsday:
"Claim on auditor switch | Prosecutors suggest CA wanted to
keep payout details quiet"
March 16, 2006 Reuters:
"Relational to press for change at CA"
August 26, 2005 Newsday: "CA nixes request for
August 22-23, 2005
July 27, 2005 TheStreet.com:
Associates to Cut 5% of Jobs"
27, 2005 Newsday: "CA co-founder to leave board"
June 28, 2005 Newsday: "Could a name-change help CA?"
June 27, 2005 TheStreet.com: "CA Shareholders Seek
April 12, 2005 TheStreet.com:
"CA Doubles Dividend"
April 12, 2005 Newsday: "CA director takes step back"
April 6, 2005 Newsday: "CA board shake-up?"
April 5, 2005 letter)
20, 2005 Washington Post (Bloomberg):
Companies Poised for Recovery - Nuveen NWQ Has Placed a Big
Bet on Computer Associates' Revitalization"
Reports of Chief Executive
December 2008 American
Institute of Philanthropy,
Charity Rating Guide &
"A Wink and a Smile
May 27, 2008 Columbia
Debits & Credits:
"Ranieri’s CA record:
down the memory hole"
November 27, 2007 Newsday:
"Suit: Lawyers cut deal on CA claims to grab fat fees"
27, 2007 Wall Street Journal:
Sues Milberg Weiss Over CA Class Action"
October 10, 2007 Newsday:
"Judge denies CA's request to pursue Wang's fortune"
October 4, 2007 Newsday:
"Sam Wyly makes new accusations against CA board"
April 17, 2007 Newsday:
"Q&A | Banker: Jury still out on CA's future"
April 14, 2007 New York Times:
Says Its Founder Aided Fraud"
April 14, 2007 Newsday:
April 14, 2007
Street Journal: "Directors' Probe Ties CA Founder To
Massive Fraud | Report Suggests Suing Wang for $500 Million; Evidence of
January 26, 2007 The Deal:
"The question of CA"
November 16, 2006 Fortune:
(November 27, 2006 print
"CA: America's most
November 3, 2006
"Business shadowed by ills"
October 30, 2006 Newsday: "Wang watches CA from afar"
6, 2006 Investment Dealers Digest:
Trouble With Lewie: The iconic former Salomon Brothers
trader finds himself targeted by shareholder advocates"
September 19, 2006
New York Post:
"Angry CA Vote - D'Amato May Lose Board Seat"
September 18, 2006
"Accounting lapses anger CA investors"
September 16, 2006 Wall Street Journal:
"D'Amato, Others Under Fire at CA"
September 15, 2005 Newsday:
"CA, investors gear up to meet | Sagging stock prices and
activists urging shareholders to withhold votes for board
members promise a lively Monday session"
2006 Wall Street Journal:
CA's Woes: Holes in Internal Controls"
June 5, 2006 Newsday:
"Challenge at CA: End the turmoil"
May 30, 2006
"CA Shareholders Tested
May 15, 2006
"CA Stability Still on
May 2, 2006 Fortune-CNN:
"CEO pay: They didn't earn it -
and should return it"
April 25, 2006
"CA Slashes Profit
April 25, 2005 Management Report of
Unanticipated Accounting Adjustments
April 25, 2006 Newsday:
"CA investors eye restitution
| Experts say guilty pleas of 2 will help the troubled company, but
questions remain on who'll repay money"
"CA's boxing match | His hands finally on 23
cartons of files, millionaire gadfly presses fight to nullify
July 2, 2004
Reuters: "Wyly lawsuit wins little support from CA
"Computer Associates: Clearing A
5, 2005 CA management response
November 15, 2005
"Computer Associates May
Execute Better In Coming Year"
2005 Financial Times:
"CA issues accounts
June 24, 2005 The Deal:
"The long road to recovery"
June 13, 2005 TheStreet.com:
Associates Gets a Closer Look"
May 31, 2005 SmartMoney:
"A Crummy Stock Gets Crummier"
April 18, 2005 Financial Times:
"CA chief candid about fall-out from scandal"
13, 2005 New York Times:
Away Lots of Money Is Easy, Right?"
"CA offers tutorial on its accounting"
October 7, 2004
"bilanzskandal - Bei dieser Firma sind alle Pferde
durchgegangen" ["Accounting scandal - At this company, the horses
have bucked their riders"]
September 25, 2004
Associates Could See More Changes"
2004 New York Times:
"Just a Friendly Group of 'Independent'
December 18, 2007
"CA could tap cash for targeted buys, execs say; reformed company
attracts bidder, source says"
Proxy Advisor Voting Recommendations
August 22, 2007 Annual Meeting
Glass Lewis & Co.
PROXY Governance, Inc.
see also recommendations for
September 18, 2006 Annual Meeting
Glass Lewis & Co.
Institutional Shareholder Services (ISS)
PROXY Governance, Inc.
Credit Ratings Services
August 3, 2006
Moody's Investor Services
(Ba1 rating with negative outlook)
"Moody's Investors Service
has confirmed CA's Ba1 senior unsecured rating and assigned a
negative rating outlook, concluding a review for possible
downgrade initiated on June 30, 2006. The Ba1 rating
confirmation reflects the company's completed accounting
review and reestablishment of current filing of its 10-K and
subsequent 10-Q's, including the company's filing of its 10-K
for its March 2006 fiscal year on July 31, 2006.
"The negative outlook reflects challenges the company has to
implement effective financial controls, remediate material
weaknesses to its financial reporting, contain sales force
compensation costs, and revive client billings performance.
...Moody's notes that for fiscal 2006, the company's former
sales compensation plan resulted in an unexpected $75 million
increase to commission expenses (2% of total expenses), while
client billings declined slightly, excluding acquisition
related products and accelerated customer payments. In Moody's
opinion, current revisions to the former sales force
compensation plan could negatively impact morale, the
retention of key sales executives, and financial performance.
"...the rating also reflects the uncertainties surrounding the
company's ineffective internal controls, subdued organic
client billings performance, unsettled fulfillment of the
terms of the Deferred Prosecution Agreement (DPA), modest
returns on net assets, competition from integrated and
non-integrated technology vendors, and exposure to mature
mainframe and Unix markets, which drive the overall Ba1
July 5, 2006 press release
Standard & Poor's (lowered
ratings, negative watch)
"Standard & Poor's Rating
Services said today that it lowered its corporate credit and
senior unsecured debt ratings on Islandia, N.Y.-based CA Inc.
to 'BB' from 'BBB-', and placed them on CreditWatch with
"'The rating action follows the company's announcement that
its board of directors authorized a $2 billion share
repurchase that partly will be debt-financed," said Standard &
Poor's credit analyst Philip Schrank. The rating downgrades
reflect our assessment that CA no longer possesses an
investment-grade financial policy in light of the announced
share repurchases. ...Additionally, CA did not meet the
deadline for filing its 10-K, and likely will need to restate
previously reported results and report additional material
weaknesses. The delay is from accounting issues surrounding
its stock option grants and revenue recognition."
June 8, 2006 press release
Fitch Ratings (negative
"The Negative Outlook and ratings concerns
primarily center on CA's delayed earnings release for the
fourth quarter and fiscal year ending March 31, 2006, due to
additional accounting work necessary to accurately determine
sales commission expense and income taxes. ...Fitch is
concerned the material weaknesses in internal accounting
controls identified by CA management and its auditor, KPMG,
could lead to identification of further inaccuracies in the
company's financial statements and additional restatements.
Previous misstatements of CA's earnings in fiscal years 1999
and 2000 resulting from weaknesses in accounting controls were
the subject of shareholder lawsuits, which have required
significant litigation and settlement costs, and resulted in a
Securities and Exchange Commission (SEC) investigation.
"The negative outlook also considers what Fitch believes are
on-going risks for meeting corporate governance and internal
controls initiatives to satisfy any additional recommendations
by the government-appointed independent examiner as required
under the company's September 2004 agreement with the
Department of Justice (DOJ) and SEC. Although previously
anticipated to conclude in September 2006, Fitch believes the
independent examiner's report and presence at the company
could be extended due to the aforementioned earnings delay and
additional accounting challenges. A satisfactory and timely
conclusion to the independent examiner's reports could
stabilize the ratings.
"Also considered for the ratings are continued senior
June 1, 2006 press release:
Moody's Investor Services
"The outlook revision to
negative is prompted by the company's May 30th announcement
that it will delay the release of its fourth quarter and
fiscal year ended March 31, 2006 earnings report and has yet
to conclude its review of forecasting, processing, and
monitoring of sales commissions. The revision reflects
challenges the company has to implement effective financial
controls, the recent departure of key personnel, including the
company's chief software architect, financial officer, and
operating officer, as well as subdued billings performance,
which the company announced on May 30 declined slightly in
fiscal 2006, excluding acquisition related products and
accelerated customer payments."
May 27, 2005 press release:
Standard & Poor's (negative
"The outlook revision
reflects Computer Associates' recent announcement that it has
identified apparent improper accounting practices related to
transactions entered into between fiscals 1998 and 2001....
The company expects the impact of the adjustments to fiscal
years 2002 through 2004 to be minor and not affect current or
future cash flows. In addition, Computer Associates has
determined that former members of senior management, who are
no longer employed by the company, were involved in approving
the transactions in question. Nevertheless, Standard & Poor's
had assumed that Computer Associates' accounting issues were
November 15, 2004 press releases:
Fitch Ratings (BBB-)
"...while a legal agreement
was reached with the Department of Justice (DOJ) and
Securities & Exchange Commission (SEC) in September 2004, the
credit ratings for CA assume that the company will improve its
corporate governance and internal controls and satisfy any
additional recommendations by the government-appointed
independent examiner as required under the agreement."
Moody's Investors Service
"Moody's would view
positively CA's fulfillment of the terms of the Deferred
Prosecution Agreement (DPA) with the Department of Justice and
the SEC regarding their investigation of CA's prior accounting
mismanagement, recruitment of a permanent CEO and CFO,
continued evidence that the company has not suffered a
deterioration in bookings and billings due to adverse factors
over the past two years, and the company's maintenance of
financial flexibility from internal and external liquidity
sources. Continued progress on these matters could lead to a
positive outlook in the near term and a subsequent ratings
December 28, 2004
Moody's Liquidity Rating (SGL-1)
Glass Lewis “Proxy Paper” Addressing Forum
(August 19, 2004)