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CA's Internal Investigation Pulled its Punches

CA's Internal Investigation Pulled its Punches

The internal investigation of its books that Computer Associates' board spent $30 million on has wrapped up without clarifying the state of things prior to 1999, when the company's top three executives, ex-CEOs Charles Wang and Sanjay Kumar and co-founder Russell Artzt, qualified for a monster $1.1 billion bonus on the strength of the company's stock price, even though the company has admitted that roughly $560 million in revenues were overbooked before fiscal 2000.

The law, it seems, only requires five years of correct statements and CA is due to put out its fiscal '04 numbers in May. Besides, the controversial bonus, which the government is believed to be examining from all angles, apparently wasn't within the review's purview.

However, CA's new chairman Lewis Ranieri said the company was reviewing other bonuses.

One of the company's big institutional investors, Amalgamated Bank's Longview Investment Fund, set out the other day to get executives who benefited from the fraudulent accounting practices to disgorge their ill-gotten gains. Theoretically that should include Kumar who got a $3.16 million bonus in 2001, Wang who got $4.78 and indicted ex-CFO Ira Zar who got $950,000.

But getting back to CA's internal investigation. The internal audit didn't implicate Kumar. Supposedly the audit committee couldn't find a smoking gun tying Kumar directly to the stock fraud despite the evidence given to the government by his underlings, who testified his fingerprints were all over it.

According to the Wall Street Journal, the prospect of the continued employment of ex-CA sales chief Stephen Richards, the latest executive to be ousted, was an "issue of concern" that the prosecutors raised with CA's board during a meeting last week. Which is how Richards came to be asked to tender his resignation.

Richards is reputedly to be the unidentified staffer the government called "Executive 2" in the indictment of another ex-CA VP who was party to the illegal revenue recognition.

Oddly enough, however, the indictment also mentioned an "Executive 1," who is reportedly Sanjay Kumar, who managed to cling to a job at the company as chief software architect although he had to turn over his chevrons over to an interim CEO. As a matter of fact, Kumar is cited in every indictment the government has brought so far yet reportedly nothing much has changed at CA since Sanjay stepped down.

Negotiations between the company and the prosecutors have reportedly started. CA is angling to keep itself out of court. Reportedly it's going to take a lot of persuasion.

Meanwhile, Nortel Networks, also under investigation by US and Canadian authorities, has fired its CEO, CFO and controller "for cause." It said 2003 and parts of 2001 and 2002 would have to be reinstated. Its first-quarter numbers will be delayed. Like CA, Nortel's audit committee is also sniffing around.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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