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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.

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See also

March 22, 2005 CA Forum Report:

Explanation of “Ownership” Basis for Restitution


March 24. 2005 Alternative Investor View

For Administrator's conclusions, see

July 29, 2005 CA Forum Report: Administrator’s Plan for Restitution Fund


CA Forum Report


Review of Restitution Fund Issues


            At an informal March 9, 2005 meeting with the Administrator of the CA Restitution Fund, Kenneth R. Feinberg, and in subsequent exchanges of comments, members of the Forum’s Panel – Professors Lucian Arye Bebchuk of Harvard Law School, Stephen J. Choi of NYU Law School, Merritt B. Fox of Columbia Law School, and Jeffrey N. Gordon of Columbia Law School – and other invited representatives of investor interests responded to Mr. Feinberg’s request for the CA Forum’s review of issues to be considered in his preparation of a “Plan” for distribution of the $225 million Fund.[*]


            The following investor and public policy issues are summarized below:

Restitution for Owners

Size of Investment



I.          Distribution based on ownership rather than trading


            Mr. Feinberg reported that he had initially contemplated a Plan for the Restitution Fund’s distribution that simply duplicated the allocations established for the recent CA settlement of class action securities fraud claims.  At the conclusion of the meeting, though, he requested suggestions for a practical alternative based instead on who owned CA stock and was injured by the impairment of its intrinsic investment value resulting from illegal management conduct.


            A distribution based on “ownership” injury, rather than on “trading” injuries resulting from the fraudulently inflated pricing addressed in securities class actions, was supported by these arguments:

  1. The illegal conduct specified in the Deferred Prosecution Agreement (“DPA”) included acts that were not covered by securities laws, and for which no remedy was or is available through conventional class action claims governed by the Private Securities Litigation Reform Act of 1995 (“PSLRA”).
  2. Investors injured by trading at fraudulently inflated prices have been compensated in the recent class action, and have accepted that settlement of their claims.
  3. Investors injured by the damage to the intrinsic value of the business enterprise in which they own stock have not received any compensation.


            Panel members Fox and Gordon expressed views which, with some differences, supported the establishment of a date of ownership prior to the full disclosure of management misconduct, since anyone acquiring CA stock after that date would be paying a price which was discounted to reflect the value impairment.  While recognizing the reality of gradual revelations of misconduct, practical considerations suggested the use of a single date which could be considered adequate “rough justice.”  Whether a single date or series of dates is used, and whether it should be immediately prior to the September 22, 2004 announcement of the DPA settlement or before the beginning of the period established for the settled class action, would necessarily be based on the Administrator’s judgment of the relevant facts.


            Mr. Feinberg had also expressed concern that any alternative “ownership” basis for his Plan of distribution must be administratively practical.  Based on post-meeting discussions with ADP and others familiar with investor identification and communication processes, it was confirmed that ownership on a specified date can be determined from the same registrar, custodian and brokerage records that are routinely used to establish stock purchase and sale transactions in a securities class action.  The process could in fact be much simpler if, for example, the Plan is based on holders as of the record date for CA’s last annual meeting of shareholders so that notifications can be made by restoring the list of investors who received proxy statements.


II.        Differentiation based on size of investment


            Most of the meeting’s participants believed that it would be unfair to discriminate against shareholders based simply on size of investment.


            Arguments for limiting or proportionally reducing allocations to larger shareholders were based on the theory that larger shareholders have a greater ability to collect information and influence management, and should therefore be considered partially responsible for the failure of oversight that ultimately required government intervention.  The consideration of proportionally reduced distributions was also encouraged by the example of the currently proposed “Global Research Analyst Settlement,” although that provision was based on the more widely accepted theory that larger purchasers have access to more information resources which could have reduced their reliance on any defendant analyst’s recommendation.


            The general view, though, was that there is no real empirical support for assuming that larger investors are in a better position to detect or discourage management misconduct.  We should therefore treat them as being injured the same as any small investor, in proportion to the number of shares held.


III.       Notification of shareholders


            Reference was made to the concerns expressed by several CA shareholders about the absence of notices from the company or brokers about the Restitution Fund.


            It should be assumed that the Administrator’s Plan will include effective provisions for notifying shareholders who may be eligible for distributions, and that the process for court review and approval of the Plan will also follow conventional procedures for comment and a public fairness hearing.




            Questions and comments concerning the Restitution Fund, including more details about the Forum’s review of issues, will be welcomed.


            Everyone contributing to this program – including the Administrator, the Forum Panel members, the invited representatives of investor interests and each of the Forum participants who presented questions or comments – is to be thanked for helping to define standards which will shape our evolving capital markets.


GL – 3/15/05



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.

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