Dissident CA Inc. shareholder Sam Wyly this month scored a victory in his years-long effort to retrieve ill-gotten gains from former Computer Associates directors and executives, gaining access to reams of evidence in a civil class action settlement his lawyers say should never have been agreed to.

 

A State Supreme Court justice on Feb. 8 granted Wyly's motion ordering three class action law firms to turn over years' worth of evidence they collected as part of their lawsuits alleging accounting fraud by former CA executives.

 

CA and the law firms, after years of contentious court actions, agreed to a settlement in 2003 - weeks before the company first acknowledged accounting misdeeds. CA agreed to issue shares ultimately valued at around $140 million to settle the shareholder claims. Wyly's lawyers argue the settlement should have been much higher.

"By any measure this settlement was a joke," said William Brewer, an attorney for Wyly who said he believes the ill-gotten gains amounted to more than $1 billion.

Representatives for the class action law firms didn't respond to phone calls yesterday.

Wyly sought the documents, which include interviews with former CA officials and clients, sales contracts, memos and reams of related documents, to determine why the settlement was reached before some of the more serious findings in the case were publicly reported. Justice Joan Madden ordered the documents, with the exception of certain privileged material, turned over within 45 days.

In petitioning the court for the documents, lawyers for Wyly argued he had a right to them because the firms, including noted class action firms Milberg Weiss Bershad & Shulman and Stull, Stull & Brody, were effectively representing him at the time they reached the settlement with CA.

The settlement, which Wyly has argued was reached fraudulently because the CA lawyer who helped negotiate it later pleaded guilty to obstruction of justice, is critical to Wyly's case because it prevented future litigants from suing executives and directors named in the settlements.

Wyly wants those settlement releases voided so he can pursue funds from former CA executives, including former chief executive Charles Wang and current executive vice president Russell Artzt, among more than a dozen others. Neither Wang nor Artzt has ever been charged with wrongdoing, but former chairman Sanjay Kumar and six others pleaded guilty to charges including obstruction of justice and securities fraud. Kumar was sentenced to 12 years in prison.

Wyly in 1999 sold his former company, Sterling Software, to CA; in 2001 he waged an unsuccessful proxy fight to take control of CA's board.

Brewer noted that the law firms split roughly $40 million as a result of the settlement. In addition to understanding why they agreed to the settlement, Brewer said he also hopes to understand why the law firms resisted providing the documents, which he said he has requested for two years.

"Even if you assume they had a good legal position, 'Why did they fight this so hard?' is a good question," he said. "I was frankly dismayed when they [the law firms] didn't run to our side to assist us, but instead fought us all the way in turning over this information."