Former Computer Associates CEO charged with fraud, company agrees to pay $225 million

Wednesday, September 22nd 2004, 9:48 am
By: News On 6

NEW YORK (AP) _ The former CEO of software maker Computer Associates International was charged Wednesday with securities fraud in a multibillion-dollar accounting scandal, and the company itself agreed to pay $225 million to stave off criminal charges.

The government agreed to defer prosecution of the company for 18 months to give Computer Associates time to show that it has cleaned up its act. Prosecutors said it marked the first time in any major corporate fraud case that the government has made such a move.

At a news conference in Washington, 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.''

But he added: ``If they don't take those steps, the consequences will be severe.''

The former chairman and CEO, Sanjay Kumar, also was charged with conspiracy and obstruction of justice in an indictment unsealed Wednesday. Similar charges were brought against the company's former head of worldwide sales.

Computer Associates is the country's fourth-largest software maker.

Robert Giuffra, an attorney representing Computer Associates, called the settlement a ``fair, balanced and just resolution of this deeply disturbing matter.''

He conceded that former executives ``betrayed the trust of the board, Computer Associates shareholders, and 15,000 employees,'' adding the board of directors ``fully supports the government's ongoing effort to bring all wrongdoers to justice.''

In April, the company restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked.

Prosecutors said the bookkeeping scheme, which they called ``a systematic, companywide practice of falsely and fraudulently recording and reporting'' revenue, was intended to pump up quarterly earnings reports to meet analysts' expectations and bolster the company's stock price.

The Long Island-based company said it had billions of dollars in annual revenue in the late 1990s. Reported revenues plunged after the company changed its accounting practices in the face of increased outside scrutiny.

Three former Computer Associates executives have admitted that they fraudulently recorded hundreds of millions of dollars worth of contracts to inflate the software company's quarterly earnings.

The executives entered guilty pleas under deals that prosecutors called an important move toward indicting other high-ranking company executives.

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