NEW YORK, July 2 (Reuters) - Texas billionaire Sam Wyly's latest battle
against management of software maker Computer Associates is getting
little support from investors who question his motives and credibility.
Wyly's Ranger Governance Ltd. has sued 10 former and two current
Computer Associates executives on behalf of the company and its
shareholders, seeking to recoup more than $1 billion in bonuses that
plaintiffs claim was based on erroneous financial reporting.
"Some people think that Wyly is just motivated by vengeance, this is
another opportunity for him to grab another quick $10 million," said
Gary Lutin, an investment banker who represents shareholder interests
and works on corporate control controversies.
Wyly became a major shareholder of the Long Island, New York-based
company after he sold Sterling Software Inc. to CA in 2000. In the
following two years, Wyly launched two expensive proxy fights, seeking
to replace certain board members.
Two years ago Wyly walked away with $10 million from CA in exchange
for refraining from launching any proxy fights against the company for
five years.
"Most shareholders would not consider Wyly as an appropriate
representative of their interests," said Lutin, who is not a CA
shareholder but has led a CA shareholder forum sponsored by Wyly.
"In the past he has represented only Wyly's interests," he added.
Wyly's attorney, William Brewer, dismissed those comments as "silly,"
adding that any damages be recovered from the suit will go to Computer
Associates. Ranger will be reimbursed for the litigation costs. A
lawsuit like this could take 15 months to two years.
When asked if Ranger or Wyly would accept a settlement and drop the
suit, Brewer said, "Absolutely not."
An institutional shareholder, who spoke on condition of anonymity,
said, "The lawsuit is an annoyance. It is going to cause management to
divert attention to that instead of running the business."
CA is facing a long-running criminal investigation into its past
accounting, which resulted in the departure of 15 executives including
former Chief Executive Officer Sanjay Kumar. Four former executives,
including its former chief financial officer, pleaded guilty to charges
including securities fraud and obstruction of justice.
The software maker, which said its board is still reviewing past
compensation issues, told Brewer that Wyly and his group have breached
their obligations under the 2002 agreement, which has been kept
confidential. Brewer disagrees, saying that the agreement forbids Ranger
from launching proxy fights, not lawsuits.
Brewer stressed that Wyly is not trying to "greenmail" the company,
noting the $10 million paid by CA in 2002 was a small fraction of the
cost of the proxy fight undertaken.
Greenmail refers to payments by a target company to a bidder, usually
to buy back acquired shares at a premium to the market price in order to
dissuade the takeover effort.
It remains to be seen whether Ranger's suit will trigger more
shareholder lawsuits. Computer Associates last August agreed to pay
about $144 million to settle all outstanding litigation related to
claims about its past accounting problems.
"I am surprised to see that whole lawsuit business come back again,"
said Nitsan Hargil, an analyst with Friedman Billings Ramsey.
Ranger's suit also named Computer Associates as a nominal defendant,
as the company did not bring the suit itself.
Other shareholders have also asked CA to urge some executives to pay
back the bonuses awarded for periods when revenues were booked early.
For example, Amalgamated Bank's LongView Fund, which launches two
dozen shareholders' proposals a year on various governance issues, has
proposed to the CA board to recoup the bonuses paid on earnings that
were restated.
"The dialogue is ongoing," said Con Hitchcock, an attorney for
LongView. "We will keep talking. Either we will reach an agreement or
you will see our proposal in CA's proxy agreement at the end of July."
Shares of Computer Associates were off 9 cents at $27.58 in early
trade on the New York Stock Exchange.