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See also the April 2001 New York Times article referenced below as what prosecutors said started the investigations of CA, written by the same reporter:


April 29, 2001 New York Times

"A Software Company Runs Out of Tricks; The Past May Haunt Computer Associates"


The New York Times
April 25, 2006

Software Chief Admits to Guilt in Fraud Case

Robert Stolarik for The New York Times

Sanjay Kumar, the former chief executive of Computer Associates, outside Federal District Court in Brooklyn on Monday.

Just two weeks before they were to go on trial, two former top executives of Computer Associates International, the once-booming software company, pleaded guilty yesterday to eight counts each of securities fraud and obstruction of justice in Federal District Court in Brooklyn.

Sanjay Kumar, the former chief executive of Computer Associates, and Stephen Richards, the company's former top salesman, confessed to a wide-ranging conspiracy to inflate the company's sales in 1999 and 2000 and interfere with the subsequent federal inquiry

The men repeatedly lied to their own lawyers and to federal investigators, according to the indictment, which also said that Mr. Kumar even authorized paying $3.7 million to buy the silence of a potential witness.

The pleas came in a two-hour hearing yesterday afternoon before Judge I. Leo Glasser. The men had maintained their innocence for years and had previously pleaded not guilty to the charges, which carry prison terms of as much as 20 years apiece.

"I take full responsibility for my actions, and I apologize," Mr. Kumar said in a firm voice. Mr. Richards made his plea a few minutes later.

With 15,000 employees worldwide, Computer Associates, now known as CA Inc. and now the world's fifth-largest software provider, is among the highest-profile companies based on Long Island. Mr. Kumar owns the New York Islanders hockey team with Charles B. Wang, the company's founder and former chairman. Since 2004, when Mr. Kumar resigned as chief executive, CA has replaced almost its entire senior management team.

The pleas appear to cap a four-year investigation of CA that prosecutors have said began with a New York Times article in April 2001 about accounting irregularities at the company. While the investigation began slowly, in part because of the obstruction led by Mr. Kumar, it steadily gained momentum in 2004 and last year, investigators said.

The obstruction of justice charges carry maximum prison sentences of up to 20 years each, while the fraud charges carry maximum sentences of 5 to 10 years each. Prosecutors declined to comment on the length of the sentence Mr. Kumar and Mr. Richards might receive, but said the men had not been promised leniency in return for the plea. Sentencing is scheduled for Sept. 12.

Mr. Kumar, 44, appeared to have risen to the top of American business in 2000, when Mr. Wang promoted him to be Computer Associates' chief executive. As executives, both men were known for their aggressive styles, which led many customers and employees of Computer Associates to complain about the company's hard-edged negotiating tactics.

Computer Associates is not well known among consumers, but big corporations depend on its software to manage their computer systems and networks.

As Computer Associates' stock soared during the 1990's, Mr. Kumar grew rich. In 1998, he received a $330 million bonus, one of the largest paydays ever for an American executive. But in mid-2000, the company reported an earnings shortfall that caused its stock to plunge 43 percent in a day. Its sales and profits have never recovered.

Now, Mr. Kumar has admitted that at least part of the growth that the company reported in the 1990's was a mirage. The indictment focuses on the backdating of sales contracts, which enabled Computer Associates to meet analysts' forecasts in late 1999 and early 2000. The indictment also mentions sham sales reported by the company.

CA shares closed yesterday at $25.51, down 25 cents. The price is down about two-thirds from its high of $75 in January 2000. The company reported $3.5 billion in sales last year, compared with $6.1 billion in 2000.

Even after the federal investigation began early in 2002, Mr. Kumar's position appeared to be impregnable. In August 2002, Mr. Wang stepped down as chairman and Mr. Kumar succeeded him.

Of the top executives at Computer Associates in the late 1990's, only Mr. Wang has not been indicted, and prosecutors have never publicly mentioned Mr. Wang as a focus of their investigation. The statute of limitations for securities fraud is five years, so Mr. Wang cannot be prosecuted for any of Computer Associates' actions before April 2001.

In April 2004, the investigation gained momentum as three other former senior executives, including Ira Zar, the chief financial officer, pleaded guilty to charges in the case. Those men are awaiting sentencing. A week after their pleas, Mr. Kumar resigned as chairman and chief executive.

As late as last Friday, the government brought a new indictment, charging Thomas M. Bennett, a former Computer Associates executive, with spending $3.7 million of company money in 2003 to bribe a potential witness in the investigation. Mr. Kumar directed Mr. Bennett's actions, according to the indictment.

As the trial approached and they saw the extent of the government's case, Mr. Kumar and Mr. Richards might have decided they had no choice but to plead guilty and hope for the best, lawyers close to the investigation said. By pleading guilty, the men spare the government the expense of a trial, and Judge Glasser may look favorably upon the contrition they expressed yesterday.

Lawyers for Mr. Kumar and Mr. Richards declined to comment. Mr. Kumar said through a spokesman that he "is now focused on helping his family get through this difficult period."

Former employees have said that during the late 1990's, Computer Associates engaged in many tricks to inflate its sales and profits, including booking sham sales and backdating contracts. In their pleas, Mr. Kumar and Mr. Richards admitted backdating contracts, and the indictment and other supporting evidence refer to repeated sham sales.

The Securities and Exchange Commission, the Federal Bureau of Investigation and prosecutors worked jointly on the investigation. Five former senior executives at Computer Associates have now pleaded guilty, and the company has paid $225 million to a shareholder restitution fund.

"The guilty pleas today of Computer Associates' former C.E.O. and its former head of worldwide sales are the culmination of the government's successful investigation," said Roslynn R. Mauskopf, the United States attorney for the Eastern District of New York, which includes Long Island.

Prosecutors did not promise Mr. Kumar or Mr. Richards leniency in return for the guilty plea, said Eric Komitee, deputy chief of business and securities fraud for the United States attorney's office.

"There is no agreement of any kind," Mr. Komitee said. "The defendants simply pleaded to the indictment."




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