 Software Computer Associates (CA:NYSE) will repay shareholders $225 million and face 18 months of government monitoring as part of an accounting fraud settlement that led to the indictment of the company's former chief executive. "With these agreements, CA has taken a critical step in closing this deeply troubling chapter in its history," said CA Chairman Lewis Ranieri in a prepared statement. "On behalf of the company and all its employees, we tender our sincere apologies to our shareholders and customers." Former Chief Executive Sanjay Kumar was indicted on federal securities fraud and obstruction charges, as well as conspiracy to interfere with the accounting probe, and the same charges were levied against Stephen Richards, the company's former head of worldwide sales. "The defendants are accused of perpetrating a massive accounting fraud that cost public investors hundreds of millions of dollars when it collapsed. Then they allegedly tried to cover up their crimes by lying," said Deputy Attorney General Comey, who chairs the president's Corporate Fraud Task Force. "If proven true, such conduct cannot be tolerated, and the Corporate Fraud Task Force's track record shows that it will be met with severe penalties." Computer Associates' former general counsel, Steven Woghin, pleaded guilty on Wednesday to criminal charges stemming from the two-year investigation. Other former CA executives have already pled guilty to charges of criminal fraud and obstruction of justice. "Your honor, I am ashamed to be standing here today," Woghin said in federal court. "It is entirely inconsistent with my behavior through a 30-year legal career." Former Computer Associates executives have admitted that they backdated more than $2 billion in sales in 2000 and 2001 to inflate revenue for certain quarters. The company has restated financial reports for those years. Kumar was demoted earlier this year and then left the company. The monitoring, known as "deferred prosecution," gives the government the option to lodge criminal charges against the company should it violate terms of the agreement, which mandates cooperation in the ongoing criminal investigations and adherence to ethical accounting and business practices. If after 18 months of monitoring by a court-appointed official it is determined that CA has complied with the agreement, the U.S. Attorney's Office will seek dismissal of the charges and the agreement will expire. Criminal charges against it would disqualify the Islandia, N.Y., software giant from competing for government contracts, which would be a major blow. Gary Lutin, an investment banker and shareholder-rights advocate who has been monitoring the case for some time, said, "I think the government is right in its view that the company needs more effective monitoring; I hope that this will encourage investors to take a more active role in the continuing oversight of Computer Associates." The company agreed Wednesday to help the government retrieve any compensation and bonuses found to be awarded based on fraudulent financial results, a sore point with many investors. Three executives, including founder Charles Wang and Kumar, split stock bonuses worth $1.1 billion in 1998. The investigation and its legacy of mistrust has been a serious overhang for the stock. Analyst Trip Chowdhry of FTN Midwest Research said the resolution should boost shareholder value, but perhaps not immediately. "This may signal the emergence of a new CA, and will free management to focus on execution," he said in an interview. "Customer apprehensions should be alleviated as well. But the very harsh IT spending environment is now very significant and could hold the stock back." Con Hitchcock, outside counsel for the Amalgamated Bank's Longview Fund, which owns 250,000 shares said he is pleased that the company will likely not face indictment -- "an outcome that would serve no one" -- but "the proof of the pudding is when responsbile individuals write large checks back to the company." Amalgamated sponsored the shareholder resolution demanding return of the bonus money. |