Ex-CA chief Kumar pleads guilty
Former CEO faces up to 20 years for role in $2.2 billion accounting fraud at computer software firm.
NEW YORK (Reuters) - Sanjay Kumar, the former chief executive of CA Inc., pleaded guilty on Monday to securities fraud, perjury and obstruction of justice charges related to his role a $2.2 billion accounting scheme at the computer software company.
Kumar, who left Computer Associates International Inc., as it was known, in June 2004, improperly booked software license revenue from 1999 to 2000 in order to meet Wall Street analysts' quarterly earnings expectations and then lied to investigators about it, according to the indictment.
In one instance, prosecutors charged that Kumar paid off a customer who threatened to tell the government about a bogus software deal. The payoff of $3.7 million was made while Kumar knew an investigation was pending against the company.
Stephen Richards, the former head of sales at CA Inc. (Research), as the company is now known, also pleaded guilty to the charges at a hearing before Judge Leo Glasser in U.S. District Court in Brooklyn.
"The guilty pleas today of Computers Associates' former CEO and its former head of world-wide sales are the culmination of the government's successful investigation into a culture of corruption and fraud at Computer Associates, Roslynn Mauskopf, U.S. Attorney for the Eastern District of New York, said in a statement.
The men, who initially pleaded not guilty in September 2004, had been scheduled to go on trial May 8. Prosecutors would not comment on why the men changed their plea, but noted another ex-CA executive, Tommy Bennett, was arrested and charged on Friday for his role in the scheme.
"I know my conduct was wrong ... I apologize for my actions," Kumar, who was dressed in a dark suit and stood with his hands behind his back, told the court at the hearing that lasted more than two hours.
Kumar, 44, and Richards, 41, both left the courtroom without commenting on their pleas. The charges in the nine-count indictment against them range from conspiracy to commit securities fraud, conspiracy to obstruct justice, to obstruction of justice.
As part of the scheme, Kumar and other sales executives back-dated software license contracts so that revenue would be recorded in a quarter where extra sales were needed to help the Islandia, New York, based company to meet or exceed Wall Street estimates, the indictment said.
In one instance, Kumar flew in the company jet to Paris where he personally negotiated a license agreement for $32 million. That contract was backdated to make it appears that it had been finalized and signed on June 30, 1999, the government said.
Each count in the indictment carries a maximum sentence ranging from 5 to 20 years. Sentencing was set for Sept. 12.
Richards, a native of New Zealand, may be deported as part of his sentencing, the judge said.
CA, a developer of business software, restated its results for fiscal 2001 through 2004 after Kumar left the company in 2004. It also installed new management, renamed the company and reduced its workforce.
Both men remain free on $5 million bond and have surrendered their passports.
In 2004, CA agreed to pay $225 million in shareholder restitution and continues to cooperate with the government as part of a deferred prosecution agreement.
CA shares closed down 25 cents, or around 1 percent, at $25.51 in Monday trading on the New York Stock Exchange. The stock is down 10 percent so far this year versus a five percent rise on the S&P 500 index.