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Note: The committee report referenced in the article below concluded that until June 2003 CA directors had consistently failed to take "action in situations where, although action was not required to satisfy their fiduciary duties under Delaware law, it nonetheless might have benefited the Company and saved it from further harm." For a copy of the report, see:


Report of CA Board's Special Litigation Committee


Newsday, April 17, 2007 article




Banker: Jury still out on CA's future


April 17, 2007

A special litigation committee of the board of CA Inc., the Islandia-based software giant, released a scathing 390-page report Friday night accusing former chairman Charles Wang of instilling a "culture of fear" during his tenure at the software manufacturer. The report paints a picture of a company mired at the time in wrongdoing at the top.

Newsday spoke yesterday to Gary Lutin, a Manhattan-based investment banker who has headed a shareholder forum on CA matters, about the outlook for the company.


What happens to CA stock?

Well, I expect investors to be somewhat encouraged by the committee's apparent appreciation of its responsibilities for oversight. Nonetheless, investors need to look for more signs of progress. But the committee's report provides some basis for optimism.

How so?

The committee's report indicates at least some board members now appreciate the requirements of effective management oversight and the need to break away from the old CA way. That, in turn, may empower [John] Swainson [CA president and chief executive] and other members of management to thoroughly clean things out rather than sweep things under the rug.

What specifically do you think management and the board need to do?

They mostly need to consider whether shareholder interests would be best served by trying to grow the company on a foundation of corporate integrity and credibility or whether it should be sold to an entity that can establish that critical foundation.

Do you think a sale is the best course for the company?

That's something that needs to be considered and evaluated by a board of fully informed directors, not someone like me ... [who can only] speculate.

But do you think CA can survive independently?

Fixing a company burdened by the traditions of the old CA way is a real challenge.

What has surprised you most about the CA scandal?

The thing that's surprised me most is how long it's taken for the board to respond effectively. CA is not the first company that's had management fraud, and it isn't the biggest fraud.

You referred to "the CA way." How do you define that?

It was a myth machine. Its existence depended on getting people to believe things or do things that didn't make sense, whether that was getting people to buy stocks at prices that weren't based on reality or signing contracts for software based on negotiations or threats. Management had to become increasingly aggressive in defending those myths to protect their positions.

How much blame should be placed on CA's board?

It's hard to imagine how such worldly board members could have missed all the clues. [The special litigation committee's report absolved all board members - with the exception of former chairman Charles Wang - of financial damages tied to the derivative lawsuits against the company.]

Do you think the current management is doing a good job?

That's still an open question. We'll have to see whether Mr. Swainson is able to do what needs to be done without worrying about protecting anybody's legal position or credibility.



Copyright Newsday Inc.



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