messy battle between the Texas billionaire Sam Wyly and Computer
Associates became a bit messier yesterday when Mr. Wyly sued the
company in response to a lawsuit that Computer Associates had filed
against him earlier.
In yesterday's countersuit, filed in
federal court in Brooklyn, Mr. Wyly accused Computer Associates of
violating securities laws by making false or misleading statements
about its financial results and relationship with its customers. Mr.
Wyly also contended that Computer Associates did not disclose to its
shareholders that Roel Pieper, one of its directors, had been chairman
of Lernout & Hauspie, a bankrupt Belgian software company that was
found by its auditors to have overstated its revenue.
Computer Associates dismissed Mr.
Wyly's claims. "He's trying to win a proxy battle with sound bites,"
said Sanjay Kumar, the company's president.
Computer Associates, the world's
fourth-largest independent software maker, based in Islandia, N.Y.,
has traded insults with Mr. Wyly since June, when Mr. Wyly began a
proxy fight to oust the Computer Associates' board and seize control
of the company.
Unlike many would-be corporate
raiders, Mr. Wyly is not putting up any money to buy Computer
Associates outright. Instead, he hopes to persuade existing
shareholders that he can do a better job running the company than its
Mr. Wyly, who sold his company,
Sterling Software (news/quote),
to Computer Associates for $4 billion last year, accuses Computer
Associates of alienating its clients, mistreating its employees and
overpaying its top executives. He argues that a controversial
accounting change Computer Associates introduced last October has made
it impossible for investors to understand the company's financial
Computer Associates argues that its
sales are strong and improving and that Mr. Wyly's plan to split the
company into four independent divisions would deprive it of the scale
that has enabled it to compete effectively. It also notes that at
other companies he has headed, including Michaels Stores (news/quote),
Mr. Wyly has faced criticism for overpaying himself at the expense of
The dispute between Mr. Wyly and
Computer Associates has not exactly grabbed Wall Street's attention
this summer, in part because Mr. Wyly is not offering to buy out
shareholders. In addition, Walter Haefner, a Swiss billionaire who
owns 21 percent of Computer Associates, declared his support for the
company's management soon after Mr. Wyly began his takeover attempt.
Mr. Haefner's support for management, along with top executives' 7
percent stake in the company, means that Mr. Wyly cannot win unless he
persuades more than 70 percent of the company's other shareholders to
vote for him.
But that has not stopped Mr. Wyly and
Computer Associates from trading insults in full-page newspaper ads
and lawsuits. And like a low- grade summer cold, the back-and- forth
is all but certain to continue until Aug. 29, when shareholders will
have a chance to vote.