The Work

September 3, 2008 5:15 PM

Convicted Computer Associates CEO Slings Dirt at Former Colleagues, Lawyers

Posted by Alison Frankel

Back in 2001, a Texas billionaire and conservative political activist named Sam Wyly launched a proxy contest at Computer Associates, attacking accounting practices at the Long Island software company. Soon thereafter, the already-embattled CA began its descent to near-death. Its infamous "35-day month" accounting--and the ensuing effort to hide that accounting from government investigators--led to the conviction of the company's CEO, GC, and several other high-level executives. Computer Associates itself was on the brink of indictment when Sullivan & Cromwell, counsel to the board's audit committee, worked out a deferred prosecution deal that spared the company.

But like a ghost, Wyly continues to haunt the revivified Computer Associates. On Tuesday, as first reported in Newsday, his lawyers at Bickel & Brewer filed with a Long Island federal judge a declaration by now-imprisoned former CEO Sanjay Kumar that smears almost everyone Kumar worked with--including Sullivan & Cromwell partner Robert Giuffra, Jr. The filing comes in a so-far unsuccessful attempt by Wyly to reopen a shareholder class action against CA that was settled in 2003.

In the declaration, Kumar asserts that Giuffra was brought in to represent Computer Associates at the behest of former U.S. Senator Alphonse D'Amato, a member of CA's board; the beauty contest supposedly run by the audit committee, Kumar alleges, was a sham. "D'Amato told me on many occasions that after Giuffra helped [D'Amato's brother] Armand, they were like family," the declaration states. "I have personal knowledge that Giuffra undertook conducting CA's defense against the government investigation to minimize . . . any damage that might be done to D'Amato, [CA board member Lewis] Ranieri, and [CA founder Charles] Wang."

Wyly's lawyer, Bickel & Brewer name partner William Brewer III, is almost as blunt as Kumar in his criticism of S&C. "At best, they appeared to be confused about the interests they were there to protect," Brewer told The Am Law Litigation Daily. "It's not surprising that Sanjay thought there was a conflict, that they had mixed motives."

Naturally, we called Giuffra, who has maintained close ties to the company he helped rescue from indictment, to see what he thought of Kumar's assertions. Not much, he told us, pointing us to the underlying litigation in which the Kumar declaration has been filed. "It's regrettable that Bickel & Brewer is relying on a man who's in prison for the next ten years in a last ditch effort to save their failed litigation strategy," Giuffra told us.

Here's where things get a little complicated, but stick with us. It's worth the effort. Wyly, with counsel from Bickel & Brewer, has been trying for years to get recompense for his losses as a CA shareholder. His basic assertion: CA covered up its multibillion dollar fraud for just long enough to settle a pending shareholder class action and work out a deal with Wyly to resolve his second proxy contest. Bickel & Brewer filed a 2004 motion in the shareholder class action to vacate the releases granted to CA execs and board members in the shareholders' 2003 settlement. It also filed a derivative suit and a suit to set aside the settlement of the 2002 proxy contest. All of the cases are before Long Island federal district court judge Thomas Platt, who approved the 2003 class action deal.

Brewer has repeatedly told Judge Platt of evidence that CA scammed shareholders. The judge has not been convinced, to say the least. Last August, he threw out, sua sponte, Wyly's suit to vacate the class action releases. "This Court hereby concludes that in the three years since the filing of the original...motions in 2004, the parties have failed to produce any 'new' evidence of fraud upon this Court," he wrote in an opinion that seethes with frustration.

"He prevented us from getting proof," Brewer told us. "He dismissed it without briefs or a hearing." Intriguingly the other party that has an interest in seeing the releases of CA execs vacated is Computer Associates itself. Fried, Frank, as counsel to a special litigation committee of the CA board, concluded that the company has a potential $500 million claim against its founder, Wang. The special litigation committee actually asked Judge Platt to reconsider his dismissal of the Wyly suit, but the judge refused,noting that CA, represented by S&C, had opposed Bickel & Brewer's discovery motion.

Brewer has appealed the dismissal case to the Second Circuit, but in the meantime, he sent a letter to the judge on Tuesday, attaching the Kumar declaration. "I believe he will read it, and hopefully he will say, 'Oh my goodness, there's more here,'" Brewer said.

After reading a few of the judge's rulings against Wyly, we have our doubts that's what the judge will say. But we'll let you know what, if anything, happens next.

Copyright 2008 ALM Properties, Inc.

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