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For copies of the shareholder proposal and responding CA letter to the SEC referenced in the article below, see:

Shareholder Proposal to Remove Directors

Referring to the article's report of management statements that a director "played a critical role in launching the independent audit committee investigation," see also minutes of the board meeting which report that the action was in fact taken only after being "suggested" by the U.S. Attorney and upon the advice of the company's litigation counsel that the non-employee directors were "under a legal obligation" to do so:

Court Filing of Confidential July 2003 Board Minutes


The Wall Street Journal  

April 27, 2006 5:13 p.m. EDT


CA Turns To SEC In Fight Vs Proposal On Directors' Ouster

April 27, 2006 5:13 p.m.

NEW YORK -- CA Inc. (CA) is fighting back against an activist campaign to dump two prominent directors, asking the Securities and Exchange Commission for permission to block a shareholder proposal calling for their ouster.

The shareholder resolution, submitted by a union-owned bank, seeks an annual-meeting vote to remove CA chairman Lewis Ranieri and director Alfonse M. D'Amato, a former New York senator.

The fight brewing over the resolution appears to be coming down to a battle over state shareholder rights versus federal proxy rules and SEC staff legal interpretations of the rules. In its resolution, the proponent, Amalgamated Bank's Longview funds, argues that in Delaware, where CA is incorporated, the law "expressly authorizes shareholders to remove directors."

In its letter to the SEC, however, CA's director of corporate governance, Lawrence M. Egan Jr., countered that the SEC staff has previously given companies its blessing to exclude similar proposals because they relate to the election of a director. Under an increasingly controversial provision of the proxy rules, companies can omit a proposal if it "relates to an election for membership on the company's board."

Washington, D.C. attorney Con Hitchcock, who is preparing a response on behalf of Amalgamated, is sticking to his guns on the legal grounds for the proposal.

For one thing, activists who floated such proposals in the past didn't strongly press the issue of shareholders' rights under state law, so the SEC didn't "have a chance to adequately consider the issues," he said.

And because the company doesn't allow shareholders to call special meetings, the annual-meeting proposal is shareholders' only alternative, he added. Further, Hitchcock doesn't agree with the staff's prior position that the director-election provision should exclude a proposal urging removal of a director.

"It begs the question of whether the SEC should be snuffing out a core shareholder right, particularly at a company that has had the troubles CA has had," Hitchcock said.

Even though the company, formerly known as Computer Associates, has been trying to put its scandal-scarred past behind it, Hitchcock said the company won't be able to make a clean break until the two directors exit the board. The two were targeted in part because both were on the board in 2001 when questions about accounting issues first surfaced and the company was slow to respond, he said. Ranieri joined CA's board in June 2001 and D'Amato has been a member of the board since 1999.

In the fall of 2002, for example, former chief executive Sanjay Kumar - who pleaded guilty to securities fraud and obstruction of justice charges just this week - publicly announced that a board investigation found no accounting irregularities. Various updates from the company about the state of the investigation followed, but Kumar didn't leave the company until June 2004. Several months later, Computer Associates announced it reached agreements with regulators in connection with improper accounting practices during the period between Jan. 1, 1998 through Sept. 30, 2000.

"They haven't put the past behind them and it's time to make a clean break," Hitchcock said. "This is the way to do it."

In a statement, CA said the proposal was "misguided," calling the two directors "outstanding board members."

"This proposal ignores the key roles that Mr. Ranieri and Senator D'Amato have played in putting CA back on track," the statement said, "Shareholders will be well served by their continued contributions."

Ranieri played a critical role in launching the independent audit committee investigation into the company's accounting, which led to the removal of many of the company's top managers, the company said. "And, as a member of the audit committee, Senator D'Amato was instrumental to the success of that investigation."

-Phyllis Plitch, Dow Jones Newswires; 201-938-2357;

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