Forum for Shareholders of CA, Inc.

Forum Home Page

Pending Status

Forum activities relating to CA, Inc. are temporarily suspended pending release of a court-appointed Examiner's report on management compliance with a Deferred Prosecution Agreement.

CA Forum Home Page

CA Research Reference


The Wall Street Journal  

November 3, 2006


Former CA Chief Is Sentenced
To 12-Year Prison Term, Fined

November 3, 2006; Page A3


Former Computer Associates International Chief Executive Sanjay Kumar, who helped build a software powerhouse only to embroil it in one of the biggest accounting scandals of the decade, was sentenced to 12 years in prison and fined $8 million for securities fraud and obstruction of justice.

The sentencing is the latest in a string of lengthy prison terms for white-collar criminals partly spurred by a spate of accounting scandals that lost investors billions of dollars in stock-market value earlier in the decade. Last month, former Enron Corp. President Jeffrey Skilling was sentenced to 24 years and four months in prison, while former WorldCom Inc. chief Bernard Ebbers is serving 25 years in prison.

[Sanjay Kumar]

Still, the judge overseeing the case in a Brooklyn, N.Y., court had the option of sentencing him to up to a lifetime in prison. Attorneys for Mr. Kumar didn't say whether they would try to appeal the sentence.

Mr. Kumar's former company, now known as CA Inc., continues to grapple with the fallout from the accounting scandal. Late yesterday afternoon, CA said it expects earnings per share to be below its original outlook as a result of restructuring costs. CA shares fell 7.4% in after-hours trading.

Mr. Kumar pleaded guilty in April to charges that he created what prosecutors called "35-day months" to book extra revenue after a quarter ended and a subsequent cover-up that included offering a no-work contract to a potential witness to keep him quiet. Under the fraud, the company misreported some $2.2 billion in revenue, according to federal securities officials.

"I stand before your honor today to take full responsibility for my actions," Mr. Kumar, who is 44 years old, told U.S. District Court Judge I. Leo Glasser. "I know that I was wrong and there's no excuse for my conduct." Mr. Kumar declined to comment after the sentencing, except to say he was "ready to move on."



[See court documents]1

Read Sanjay Kumar's original indictment (pdf file)2, by arrangement with FindLaw3.

Born in poverty in Sri Lanka, Mr. Kumar emigrated to the U.S. with his family and by the age of 38 rose to chief executive of the world's second-biggest maker of mainframe-computer software, getting stock awards that were worth hundreds of millions of dollars at one time.

Judge Glasser said that under federal sentencing guidelines he could have given Mr. Kumar a lifetime sentence. But he said such a long sentence would "shock the conscience of this court." Sentencing factors included the eight-count indictment to which he pleaded guilty and the economic harm of his actions, which Judge Glasser said exceeded $400 million.

Mr. Kumar will be eligible for time off for good behavior that could reduce his sentence by 15%, meaning that he will serve a minimum of just over 10 years. Parole isn't a part of the federal penal system.

Judge Glasser postponed sending Mr. Kumar to a minimum-security federal prison until the end of February. He said he wants to rule first on the amount of restitution shareholders and other victims should get from Mr. Kumar. Judge Glasser said he might change the fine depending on whether funds are needed for restitution. It isn't clear what Mr. Kumar's current financial situation is.

Mr. Kumar's attorneys had argued for a more lenient sentence on the grounds that CA, based in Islandia, N.Y., is still in business, unlike Enron and WorldCom, which filed for bankruptcy protection. CA agreed in 2004 to pay $225 million in restitution and operate under a special examiner's supervision to avoid prosecution

The defense said that almost all the revenue that CA booked early was real revenue that should have been accounted for a few weeks later. They noted that Mr. Kumar had shown contrition by pleading guilty before a trial started.

U.S. prosecutor Eric Komitee said CA represented the "most blatant example" among recent corporate scandals of "a sitting CEO directing a comprehensive scheme" to obstruct justice.

Judge Glasser said "securities fraud...did violence to the legitimate expectation of investors." He said it was clear that Mr. Kumar had falsified results to fulfill Wall Street expectations for earnings and that the stock would have plunged if the bookings had been delayed to the next quarter.

Several other executives, who pleaded guilty and cooperated with prosecutors, await sentencing. Among them are CA's former general counsel and its former chief financial officer.

CA Inc. said net income for its second quarter ended Sept. 30 rose to $53 million, or nine cents a share, from $46 million, or eight cents a share, from a year earlier. The company said its earnings excluding restructuring costs remained flat at 25 cents a share.

CA said revenue rose to $996 million from $950 million.

CA sees total restructuring charges of $150 million, most of which are to be recognized in fiscal 2007, and a reduction in work force of 1,400 positions, including 300 related to divestiture of a joint venture. The company also expects to eliminate an additional 300 positions through attrition.

Write to William M. Bulkeley at bill.bulkeley@wsj.com8

  URL for this article:

  Hyperlinks in this Article:
Copyright 2006 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit


The Forum is open to all Computer Associates ("CA") shareholders, whether institutional or individual, and to any fiduciaries or professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives, as described in the Forum Summary.

There is no charge for participation.  As stated in the Conditions of Participation, participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

Inquiries and requests to be included in the Forum's distribution list may be addressed to

The material presented on this web site is published by Gary Lutin, as chairman of the Shareholder Forum.