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Former CA chief accuses D'Amato, Ranieri of
cover-up
BY
MARK HARRINGTON |
mark.harrington@newsday.com
10:28 PM EDT, September 2, 2008
Former CA Inc. chief
Sanjay Kumar alleges his former mentor
Charles Wang "personally directed" improper accounting at the company
going back to 1987, and that several long-time board members "took steps to
protect Wang and conceal the facts."
In a 27-page affidavit filed in court Tuesday by
Texas billionaire Sam Wyly, Kumar depicts a cover-up within a cover-up,
alleging board members Lewis Ranieri and Alfonse D'Amato "had knowledge of"
the accounting misdeeds for which he went to prison -- going back "at least"
to 2003. Yet the accusations, which he said he communicated to a special
board committee through "many" interviews, never made it into a report the
board publicly filed in 2006, documenting the scandal.
Fresh allegations
Kumar's affidavit provides specific instances in which he alleges Wang
pushed him to close contracts after a quarter closed to meet earnings
figures expected by Wall Street, in violation of accounting rules.
Kumar, who pleaded guilty in 2006 to charges of conspiracy, securities
fraud, obstruction of justice and lying to
FBI agents, alleges it was at "Wang's direction" that he took a July 8,
1999, flight to Paris to close a $32 million deal with GIE Informatique --
$19 million of which was improperly recognized nine days after the quarter's
close.
Andrew Frank, a spokesman for Wang, yesterday referred to Wang's 2006
statements denying any involvement in accounting misdeeds at CA, and said he
was "appalled" by the allegations. "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," Wang said then.
A spokesman for D'Amato and Ranieri, who resigned as board chairman in 2007,
called the allegations "false." "Mr. Kumar has pled guilty to lying to the
company's board, its lawyers and its investors," said the spokesman. "It is
regrettable that, from jail, Mr. Kumar continues to be a stranger to the
truth."
CA in 2004 acknowledged former executives conspired in a multiyear,
$2.2-billion accounting scandal for which the company reached a deferred
prosecution agreement and paid more than $225 million in restitution. A
spokesman yesterday said the board conducted a "thorough" probe of the
allegations, including interviews with Kumar. "In a matter of this
complexity, one cannot draw conclusions from the uncorroborated
recollections of a single individual," the company said.
Kumar alleges Wang "insisted that CA 'stonewall" the government probe of CA,
arguing it would eventually "go away."
Implicating others
The filing also implicates CA co-founder Russell Artzt, alleging he
"actively participated in concealing CA's improper accounting practices"
from investigators and fellow board members. Kumar's affidavit alleges Artzt,
who was never implicated in the wrongdoing, helped the sales team finalize
deals after a quarter had closed. He also allegedly urged Kumar to keep
silent on Wang's alleged involvement. Artzt "told me to remain silent
because he thought that D'Amato would 'get this fixed,'" Kumar's affidavit
says.
In a statement yesterday, an attorney for Artzt said her client
"categorically denies" knowledge of, or participation in concealing the
accounting misdeeds at CA. "Mr. Kumar's statements are completely false,"
said attorney Christine McInerney, noting that Artzt, who still works for
CA, was cleared by a committee of the CA board.
A spokesman for the U.S. attorney's office in Brooklyn, which oversaw the
government's accounting fraud probe that resulted in Kumar pleading guilty,
declined to comment.
The affidavit was filed as part of a lawsuit against former and current CA
executives and directors by Wyly, a CA shareholder, hoping to recoup
hundreds of millions in lost CA investments. William A. Brewer III, lead
counsel for Wyly, said it "confirms a conspiracy and subsequent cover-up of
epic proportions."
Kumar alleges Ranieri specifically directed him to keep details of the
accounting improprieties from fellow CA director Walter Schuetze, saying
former SEC chief accountant Schuetze would "have a heart attack" if he knew
the extent of the misdeeds.
Since going to prison on a 12-year sentence last year, Kumar has been
interviewed by government and private lawyers, said Lawrence McMichael, a
Philadephia-based lawyer for Kumar. He said Kumar "will talk to anybody who
wants to talk to him and will tell them the truth." Kumar's appeal of his
prison sentence will be heard later this month. A spokesman for the U.S.
attorney's office in Brooklyn, which oversaw the probe, declined to comment.
Michael Cornacchia, a former prosecutor on the case now in private practice
in
Manhattan, said investigators are apt to look with suspicion on Kumar's
claims unless there is "independent supportive or corroborating evidence."
If new evidence of obstruction were found, it could extend any statute of
limitations on those crimes, he said, though the statute on accounting fraud
has likely expired.
Checking the books
In addition to Ranieri and D'Amato, Kumar's affidavit alleges former CA
board members Willem de Vogel and Artzt "knew of our practice of booking
revenue for a few days past quarter end." Kumar alleges de Vogel, a member
of the CA board's audit committee until 2002, knew of the improper
accounting, saying he "would call up CA executives three to five days after
the quarter's end to inquire 'How are we doing?' or, 'How do the numbers
look?'"
Lawrence Kamin, a lawyer for de Vogel, said his client "categorically
denies" the claims, noting de Vogel was to serve as a witness against Kumar
at trial. "He's one of the good guys," Kamin said of his client.
Kumar said he discussed the late-booking practice with Ranieri "during the
government investigation," which began in February 2002. In April 2003, he
alleges, he told Ranieri a former CA joint venture partner was trying to
blackmail the company about the improper accounting. He alleges Ranieri told
him to "put the past behind me," which he understood to mean "fix the
problem at all costs."
Kumar alleges D'Amato was "aware of Wang's participation" in the accounting
improprieties but "told me on more than one occasion that it was best not to
discuss Wang's involvement."
Kumar charges that D'Amato helped steer CA's internal investigation to a
lawyer he knew well, despite Schuetze's urging Kumar to interview a number
of firms. That attorney was Robert Giuffra, a Sullivan & Cromwell lawyer who
had worked with and for D'Amato and his brother Armand, going back to the
1980s. "D'Amato made it clear that I should recommend Giuffra," Kumar said,
adding that Giuffra's role was allegedly to conduct CA's defense against the
federal probe "to minimize" its "depth and any damage that might be done to
D'Amato, Ranieri and Wang."
Giuffra declined comment.
Kumar said he and Wang had a major falling out after Kumar introduced a new
business model in 2000, alleging Wang "was regretting giving up the CEO
title." So Wang fired him over breakfast in November 2001, he alleges,
though CA's board reaffirmed Kumar's post at a subsequent meeting.
Copyright © 2008,
Newsday Inc.
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