- The Washington Times - Wednesday, September 22, 2004

NEW YORK (AP) — Former Computer Associates International Inc. Chairman and Chief Executive Officer Sanjay Kumar has been charged with securities fraud, conspiracy and obstruction of justice in connection with a multibillion-dollar accounting scandal at the software company.

The charges were unsealed yesterday after the company agreed to pay $225 million to shareholders as part of a settlement that allows it to defer criminal prosecution. That agreement also settles securities fraud charges brought by the Securities and Exchange Commission.

A 10-count grand jury indictment returned Friday also charges Mr. Kumar with conspiracy to obstruct justice and levies the same charges against Stephen Richards, the company’s former head of worldwide sales.

Under the highly unusual deal to defer prosecution, an outside monitor will track Computer Associates’ financial reporting for the next 18 months.

Deputy Attorney General James Comey said the deferral will “give the company the opportunity to demonstrate that it has a culture that can be saved. Our focus is not on doing harm for harm’s sake.”

“If they don’t take those steps, the consequences will be severe,” Mr. Comey added.

Computer Associates Chairman Lewis Ranieri called the agreements “a critical step in closing this deeply troubling chapter” in the company’s history.

“Some former members of CA’s management engaged in illegal activity,” Mr. Ranieri said. “Violations of law and ethical standards, including securities fraud, obstructing a government investigation, and lying to CA’s board of directors and CA’s lawyers cannot be condoned. We fully support the government’s efforts to bring all responsible parties to justice.”

The company had earlier offered to settle the investigation for $10 million.

Also yesterday, the company’s former general counsel, Steven Woghin, pleaded guilty in federal court to conspiracy to commit securities fraud and obstruction of justice.

“Your honor, I am ashamed to be standing here today,” he said. “It is entirely inconsistent with my behavior through a 30-year legal career.”

Computer Associates, the world’s fourth-largest software maker, restated its financial results from 2000 and 2001 in April to reflect $2.2 billion in revenue that was improperly booked.

Prosecutors referred to one practice as the “35-day month” because company accountants would extend the booking of revenue in the final month of a fiscal quarter days beyond the true end of the month.

“In many ways, this scheme is emblematic of the schemes of the late 1990s, motivated by the overwhelming desire to create the illusion of success,” Mr. Comey said.

Three former executives admitted in April they fraudulently recorded hundreds of millions of dollars worth of contracts in a conspiracy to inflate quarterly earnings. They entered guilty pleas under cooperation agreements that prosecutors called an important move toward indicting other high-ranking executives.

The company’s shares fell 38 cents to $25.30 yesterday on the New York Stock Exchange.

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