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Newsday, October 10, 2007 article

 

 

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Judge denies CA's request to pursue Wang's fortune

 

BY MARK HARRINGTON | mark.harrington@newsday.com
October 10, 2007

 

CA Inc.'s plan to pursue the fortune of founder Charles Wang sustained a body blow after a federal judge denied the company's request for a clarification or a carve-out in a 2003 shareholder settlement that shields former executives from being sued for the $2.2 billion accounting scandal.

In a sharply worded decision, U.S. District Judge Thomas Platt told CA it missed the chance three years ago to alter the settlement agreement, and that he would not allow the company or its board to "railroad this court" by attempting to extend a one-year statute of limitations on opening the settlement.

The software company argued in a Sept. 27 letter to Platt that it had proper standing to file for the request. That filing was written by lawyers for CA at Sullivan & Cromwell, which conducted a separate inquiry for the CA board audit committee in 2003 that led to charges against then-chief executive Sanjay Kumar and others, but not Wang.

In his ruling, Platt noted that lawyers for Texas tycoon Sam Wyly had sent a letter in 2004 to then-CA chief executive Kenneth Cron, urging the company to join in Wyly's efforts to invalidate the no-sue clause in the shareholder settlement. Platt said that the letter was "well within the one-year statutory time frame," and that the company apparently didn't pursue it.

More recently, CA had sought a partial opening of the 2003 settlement to pursue Wang, former chief financial officer Peter Schwartz and select others who have not settled claims with the company. A special litigation committee for the CA board in a report released in April alleged that the men directed and took part in fraud and cover-up at CA.

Wang and Schwartz, who were never accused of criminal wrongdoing in the government's case or the audit-committee probe, have denied any improprieties.

Wang was interviewed by lawyers for Sullivan & Cromwell, and a report on their findings is said to have found no evidence he participated in the accounting fraud or obstruction.

"If they had something they felt was wrongdoing [on Wang's part], they would have gone to the government and made claims. They didn't," said a lawyer familiar with the case who asked not to be identified.

Wyly for years has asked the court to grant him the right to pursue claims against several current or past board members and executives, including Wang.

Ross Albert, a partner at Morris Manning & Martin in Atlanta and a former special counsel for the Securities and Exchange Commission, took note of Platt's "strong language" in the ruling in concluding there's little chance Platt would overlook the statute of limitations. "I suspect there will be further litigation and appeals," he said.

It's unclear what course CA may take in light of Platt's decision, or precisely why the statute of limitations issue wasn't foreseen. A hearing in the case is scheduled for later this month.

"We are awaiting the final hearing on the decision and considering all of our options, including potential appellate remedies," a CA spokeswoman said. "We remain committed to aggressively pursuing our rights on behalf of shareholders and utilizing all of the options available to us."

Platt noted that Wyly's company, Ranger Governance, which was denied a request to invalidate the no-sue clause in an Aug. 2 ruling, already has appealed his decision to a higher court, and thus "this court is divested of jurisdiction to amend or clarify" the order.

William Brewer, an attorney for Wyly at the firm Bickel & Brewer, said Platt's ruling leaves CA with few choices: "Either they join Ranger in supporting its appeal to reverse the dismissal, or they walk away from the claims, which it knows it should have pursued some years ago."

Asked if CA would join in Wyly's appeal, the CA spokeswoman said, "Make no mistake, CA holds the best interests of shareholders and the company as its priority."

Investment banker Gary Lutin, who has followed the CA saga through a shareholder forum, said, "The judge has made it very clear that whoever is responsible for the company's interest - whether the board or lawyers - hasn't done their job."

 

 

Copyright 2007, Newsday Inc.

 

 

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