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Letter to Administrator Concerning Shareholder Views for $225 Million Restitution Plan

(January 26, 2005)

Copied below is the text of a January 26, 2005 letter to Kenneth R. Feinberg of The Feinberg Group, LLP, who had been appointed by the court to serve as Administrator of the $225 million Computer Associates "Restitution Fund" established by the company's September 22, 2004 Deferred Prosecution Agreement with the Department of Justice and the Securities and Exchange Commission.

The letter addresses the Administrator's responsibility for developing a "Restitution Plan" for distribution of the $225 million penalty to former and present shareholders.  Observing the absence of established practices for such publicly established investor restitution funds, Forum participants are encouraged to offer their timely suggestions of relevant issues for the Administrator's consideration.

The Restitution Plan for fund allocations was one of the two matters summarized in a January 19, 2004 Forum Report: Plans for Immediate Oversight Requirements.

The Administrator responded by inviting the Forum to conduct a meeting to present shareholder views for his consideration.  The company's management was asked to cooperate, and reported in a February 11, 2005 decision that they would not fund the shareholder activities but would attend the planned meeting.




575 Madison Avenue

New York, New York 10022

Telephone (212) 605-0335

Facsimile (212) 605-0325


January 26, 2005


By telecopier: 212-527-9611


Kenneth R. Feinberg, Esquire

The Feinberg Group, LLP

780 3rd Avenue, 28th Floor

New York, New York


Re:       Computer Associates International, Inc.

            Restitution Plan

Dear Mr. Feinberg:

            As discussed, the “Restitution Plan” you are preparing pursuant to the CA Deferred Prosecution Agreement is very important to participants in the “Forum” program I’m conducting for the company’s shareholders.  Most of this country’s retirement funds and many private investors have significant financial interests in the specific CA penalty – paid from corporate assets owned by current shareholders, at 38 cents per outstanding share – as well as in the definition of standards that can be applied to the rapidly expanding use of publicly created investor restitution funds.

            Your interest in establishing precedent processes for the fair and open consideration of investor views should be widely appreciated, and will certainly encourage confidence in the recovery of both CA and the capital markets generally.  You may of course rely on Forum support of your efforts.  I will arrange for your investor communications to be distributed to Forum participants and posted on the Forum web site.  And I will be glad to consider other independent Forum activities such as surveys, open meetings, or expert panels that may contribute to your effective review of relevant investor interests.

            Regarding your interest in the range of issues that may be raised by investors, the following questions are intended as examples:

  1. How should allocations be made between injuries resulting (a) from purchases of stock at fraudulently inflated values and (b) from continuing impairment of shareholder value associated with corporate costs and credibility damage?[1]  Some investors may argue that injuries for fraudulently inflated prices have been fully compensated by the recent settlement of class actions, so that all or at least most of the Restitution Fund should be allocated to the injuries for actual value impairment that were not covered by the fraud settlement.
  2. Is it appropriate to provide restitution in relation to stock bought after investors should have been aware of corporate integrity questions raised in news reports as early as April 2001?[2]  Arguments may be made that anyone investing in CA after that date, or in any event after 2002 news reports, either was or should have been informed of the corporate integrity risks.
  3. Is it appropriate to allocate any of the Restitution Fund to an affiliated 21% shareholder that had supported past management, or at least tolerated their conduct?[3]  It may be argued that a controlling shareholder, with its access to information and ability to influence management, should not be treated the same as victimized public investors.

            Please let me know what information will be useful to you, and when you will need it.  Understanding that you intend to prepare a preliminary review of criteria for review with the U.S. Attorney’s Office by the end of next month, I will accordingly encourage Forum participants now to focus on your priority interest in identifying issues.

            Please also let me know if you want any additional information about the CA Forum program, or about any of the issues it has addressed or may address.  I hope you will find the Forum helpful in your efforts to benefit CA’s present and former shareholders.




Gary Lutin


[1] Based on data presented in footnote 1 of the Forum Summary, CA’s market discount relative to industry average valuations at the end of October 2004 continued to be more than 30%, or more than $7 billion.


[3] As reported most recently in CA’s July 29, 2004 proxy statement, Walter H. Haefner of Careal Holding AG has owned 21% of the company’s stock for several years.  For a report of Mr. Haefner’s relationship with past management, see CASH, October 7, 2004, "bilanzskandal - Bei dieser Firma sind alle Pferde durchgegangen" [with translation: "Accounting scandal - At this company, the horses have bucked their riders"].





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.

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