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Computer Associates' Former CEO Is Charged

September 23, 2004|From Associated Press

Former Computer Associates International Inc. Chief Executive Sanjay Kumar was charged Wednesday with securities fraud conspiracy and obstruction of justice in connection with a multibillion-dollar accounting scandal at the software company.

The federal charges against Kumar were unsealed after Computer Associates agreed to pay $225 million to shareholders to settle federal accounting charges against the company. The settlement allows Computer Associates to defer criminal prosecution.

An independent monitor will examine the company's financial reporting for at least 18 months. If the monitor finds Computer Associates is in compliance with its agreement with the Justice Department, the company will face no prosecution.

The agreement also settles securities fraud charges brought by the Securities and Exchange Commission.

The 10-count indictment against Kumar was returned by a federal grand jury in New York on Friday. Stephen Richards, the company's former head of worldwide sales, was charged in the same indictment with securities fraud conspiracy, obstruction of justice, conspiracy to obstruct justice and perjury.

Through his attorney, Kumar denied any wrongdoing and said he expected to be exonerated. An attorney for Richards said his client was innocent. "The government has overreached in this case," David M. Zornow said.

Under the unusual deal to defer prosecution of the company, the monitor will track Computer Associates' financial reporting while it makes three staggered restitution payments of $75 million to shareholders.

In May, the company offered the government a $10-million settlement.

Computer Associates Chairman Lewis Ranieri said the agreement let the company take "a critical step in closing this deeply troubling chapter in its history."

The company also agreed to structural changes: creating new positions including a corporate controller and a chief accounting officer, adding two independent directors, appointing a director of corporate compliance and introducing a companywide ethics training program. Other scandal-plagued companies, such as Tyco International Ltd., have introduced similar programs.

Also Wednesday, the company's former general counsel, Steven Woghin, pleaded guilty in federal court to conspiracy to commit securities fraud and obstruction of justice. He also promised to cooperate with prosecutors.

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.

Shares of the Islandia, N.Y.-based company fell 38 cents to $25.30 on the New York Stock Exchange.

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