The gloves are off.

With the release Friday night of a pummeling 390-page report accusing former Computer Associates chairman Charles Wang of instilling a "culture of fear" and fraud "at every level" of his former company, a previously closed-door dispute went public - and considerably more nasty.

 

The report, which takes Wang to task for issues like hiring inexperienced workers and directing his former protege Sanjay Kumar to close improper deals, puts Wang center stage in a matter that until now had chiefly enveloped his top lieutenants and underlings.

While Wang has made cameo appearances in the numerous civil court filings accusing CA of accounting fraud for more than a decade, the charges have never before come from within the CA boardroom.

The report followed months of investigations, interviews with 90 witnesses, and millions of pages of documents by teams of outside lawyers and consultants working for a special litigation committee of CA's board. The two-member committee recommended that the company take on previously filed litigation to pursue civil suits against Wang and others. The committee reached multimillion-dollar settlements with executive vice president Russell Artzt and other executives who, like Wang, were never implicated in criminal wrongdoing.


A response to lawsuits

The report was prepared at the request of the CA board in answer to civil lawsuits in Delaware and in Central Islip against the company, and many of its directors and officers, seeking damages for stock fraud. In addition to calling for a civil suit against Wang, the report also argues that the only people who should be held liable are Wang and the small circle of executives around him.

"This promises to be a knock-down, drag-out battle with Charles Wang fighting for his reputation and his fortune," said George A. Stamboulidis, former chief of the Long Island division of the U.S. attorney's office and now head of the white-collar crime practice at the law firm, Baker Hostetler. He was not involved in the CA investigation.

But not everyone believes Wang will suffer damage.

Matt Crosson, president of the Long Island Association, a business advocacy group, said he didn't believe the public-relations impact of the report would impact Wang or his many projects. "I don't think it means a lot to the average guy, unless and until there's a judicial determination he did something wrong," he said. Even if Wang were to lose a financial judgment in court, Crosson said, it would be years before the case might be decided.

In a statement Friday, Wang ended his long silence on the matter. Calling the report "fallacious" and suggesting it was largely based on the word of convicted felons, Wang said, "I intend to vigorously defend my good name and fight any and all efforts to place the crimes of Kumar and his management team at my feet." Kumar was sentenced to 12 years in prison in the accounting fraud; several other former executives also have been convicted.

A person familiar with Wang's thinking suggested any future response to the report depends on just what the company does next. The committee recommended pursuing claims against Wang, but the board of directors and the company must approve the plan.
 

Claims will cost CA

In addition, this person noted CA must still pay Wang's legal fees, in this and other cases, since he was never convicted of a crime in the accounting fraud scandal - fees that could mount quickly given the defense he is likely to amass.

While neither side will talk about it, there are indications that the special litigation committee and Wang had initiated settlement talks that would have resulted in a payment and could have tempered the harsh tone of the report. A Wang spokesman declined to comment.

Some are criticizing the report because it absolved all board members with the exception of Wang of financial damages tied to the claims.

From that standpoint, Gary Lutin, an investment banker who has headed a shareholder forum on CA matters, said he believes the report was flawed. "This is a joke," Lutin said. "It can't be an independent report" because it was conducted by "colleague" board members.

CA spokesman Dan Kaferle said, "We believe the report is thorough, independent and complete."
 

The world of Charles Wang

Age: 62

Career: Co-founder of Computer Associates International. Criticism surrounding the wrongful reporting of more than $500 million in revenue, as well a series of stock bonuses - in which Wang netted $670 million in 1998 - forced Wang to step down as chief executive in 2000. He subsequently left the company as chairman in 2002. Wang also owns the Islanders and the New York Dragons arena football franchise.

Real estate plans: Though forced to remove a "Lighthouse" tower from his planned Nassau Hub development at the current Nassau Coliseum site, Wang and Reckson Associates president and chief executive Scott Rechler are in charge of revitalizing the 77-acre property. His planned mixed-use Old Plainview project was withdrawn last month amid zoning fights, though Wang and Rechler will still build a pair of office buildings and 45 single-family homes permitted by current zoning. Wang is also behind the 28-unit Mariner's Walk luxury town house complex under construction in Oyster Bay, where he also owns 87 properties.