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Newsday, December 20, 2007 article

 

Newsday

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Some CA shareholders ordered to return payments

 

BY MARK HARRINGTON | mark.harrington@newsday.com
December 20, 2007

The pain for some CA Inc. shareholders doesn't seem to end.

After waiting two years for their share from the company's $225-million restitution fund tied to the $2.2-billion accounting scandal, tens of thousands of shareholders were notified by letters dated Monday that a calculation error meant they'd have to send a portion of their payments back. In addition, 2,000 shareholders entitled to payments mistakenly received none at all.

In all, 88,444 shareholders were overpaid, according to letters filed last week with the U.S. District Court in Brooklyn, which issued an order that is being sent to shareholders this week saying return of the overpayments is "mandatory." Shareholders are asked to send overpayments back by Jan. 4.

The $59.2-million error was the result of a mistake by an outside firm working for the court-appointed fund administrator, Kenneth Feinberg. The company, Gilardi & Co. of Larkspur, Calif., has issued a stop-payment on all uncashed checks as part of a series of court-approved "emergency" measures, but most shareholders are receiving letters ordering them to return roughly 20 percent of their distribution check.

For a CA shareholder with 900 shares, for instance, the restitution check amounted to around $1,000 and the amount that must be returned is $200.

As might be expected, shareholders are outraged. "These guys had two years to tally up claims and distribute the money and somehow they were off by 20 percent?" said one shareholder, Ben Woods of San Francisco, in an e-mail. "Were they using CA software or were they working with CA 35-days-in-the-month accounting?"

He was referring to CA's former practice of improperly holding open quarters to inflate sales results, a tactic that resulted in fraud, conspiracy and obstruction charges against eight former executives. Former chief executive Sanjay Kumar is serving a 12-year prison term.

In the case of the miscalculation, CA is distancing itself from the error. A spokesman said the company has "no involvement with the administrator of the fund and therefore we have no comment."

Peter Crudo, chief operating officer at Gilardi, said the problem was "human error."

Payment calculations mistakenly failed to include 2,000 eligible shareholders, he said, resulting in the overpayments. Crudo said it's the first time it's ever happened in the firm's history, and noted Gilardi must pay the costs to fix it.

In a letter to Judge I. Leo Glasser last week, Feinberg said he had notified federal prosecutors about the error, and instructed Gilardi "to initiate a series of emergency steps to minimize the damage."

In a second letter to Glasser, Feinberg said an initial review of the overpayment indicates that recovery from the 3,000 largest recipients will fix most of the problem, including the return of $50 million.

 

Copyright 2007, Newsday Inc.

 

 

 

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