- The Washington Times - Saturday, February 23, 2002

NEW YORK (AP) Computer Associates confirmed the software maker is being scrutinized by federal investigators, but disputed reports that the doubts surrounding the company had forced it to draw on a credit line to cover short-term debt.
In a conference call yesterday, CA executives said the company contacted investigators after newspapers reported this week that the FBI, the Securities and Exchange Commission and the U.S. Attorney's Office were coordinating a preliminary investigation of the company's accounting. That probe reportedly focuses on whether the business deliberately overstated profits to inflate its stock price and enrich executives.
"They have confirmed that they have some form of preliminary inquiry under way," said Sanjay Kumar, president and chief executive of the Islandia, N.Y., software manufacturer. "We'd like to know what's going on. We're very eager to provide them with whatever information that they need to dispel this cloud that's hanging over us."
Stock in Computer Associates has plunged by 58 percent in the past month because of the questions surrounding the company. The slide continued yesterday, with the stock closing down $2.91, or 15.4 percent, to $15.99 on the New York Stock Exchange. The stock has not traded at these levels since 1995.
Mr. Kumar said the company has asked to meet with investigators for more clarification about the probe's focus, but had not been provided any details.
While the investigation presents one dark cloud, CA executives tried to shake off another, insisting it recently tapped its credit line only to replenish other bank obligations after it had to cancel a bond sale earlier this month.
Mr. Kumar and Ira Zar, the company's chief financial officer, rejected reports suggesting that uncertainty about the company had hurt its ability to sell commercial paper, or short-term corporate bonds, forcing it to draw on bank credit lines to cover expenses.
Mr. Zar said CA had drawn down $600 million from one credit line, but only to pay down debt in another, not to meet operating expenses.
The series of transactions were set in motion, he said, in the days leading up to CA's planned Feb. 6 sale of corporate bonds that would have generated $1 billion in cash. On that expectation, CA committed on Feb. 5 to repaying $600 million in bank debt, using the fresh supply of cash.
The company abandoned its bond sale after Moody's Investors Service announced late on Feb. 5 that it was reviewing CA's credit ratings for possible downgrade. But by that time, CA was already committed to its debt repayment and drew on a credit line to do so, Mr. Zar and Mr. Kumar said.
"The decision to move funds between credit lines was simply a function of that anticipated close of financing that had been scheduled to close on Feb. 6, but as you all know, it did not," Mr. Kumar said.

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