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Clarification of Need for Board Policy
Assuring Respect of Investor Inquiries
(August 11-16, 2005)
Copied below is the text of an August 16, 2005 letter from
the Forum manager to the chairman of Computer Associates' board addressing a new
demonstration of the need for a board statement of policy requiring management's
respectful responses to shareholder requests for information, as suggested in an
August 4, 2005 letter.
Also copied below is the text of the referenced August 16,
2005 letter to Kenneth V. Handal, CA's secretary, executive vice president and
general counsel, responding more specifically to the issues he had raised in his
August 11, 2005 letter, a scanned copy of which can be downloaded from a link
below. Reference is also made to the agreement suggested in the
shareholder Delegate's initial demand
letter of June 27, 2005 to assure compliance with securities laws, a copy of
which can be downloaded from the following link:
Mr. Handal replied to the August 16 letters with an
August 22, 2005 letter repeating his
previously addressed statements, to which the Forum manager responded in an
August 23, 2005 letter reminding the board
of its responsibility for management respect of investor inquiries in compliance
with the company's Deferred Prosecution Agreement.
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[letterhead]
LUTIN & COMPANY
575 Madison Avenue
New York, New York 10022
Telephone (212) 605-0335
Facsimile (212) 605-0325
August 16, 2005
By telecopier: 631/342-3300
Mr. Lewis S. Ranieri
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749
Dear Mr. Ranieri:
As indicated in the accompanying copies of an August 11 letter
from Mr. Handal and my August 16 response, there is a very clear need for
the board statement of policy requested in the letter I sent you on August
4.
Management’s current practices have confused and misdirected
legitimate investor information requests by failing to distinguish between
the essential shareholder responsibility for monitoring management
performance and the responsibilities of government authorities and private
litigants to enforce compliance with laws. You must make it clear that
management should respect the needs of shareholders to obtain whatever
information they reasonably request for consideration in their investment
decisions. Cooperation with prosecutors does not relieve management of its
obligation to cooperate with shareholders.
Assuming you share my concern about the issues addressed in my
correspondence with Mr. Handal, I trust that the board will dutifully
resolve these shareholder interests.
Sincerely yours,
Gary Lutin
Enclosures
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[letterhead]
LUTIN & COMPANY
575 Madison Avenue
New York, New York 10022
Telephone (212) 605-0335
Facsimile (212) 605-0325
August 16, 2005
By telecopier: 631/342-3300
Mr. Kenneth V. Handal
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749
Dear Mr. Handal:
Your August 11 letter suggests a need to discourage confusion
about the shareholder information requests being addressed by the CA Forum.
First, your letter reflects a blurred view of shareholder
interests. It is important to make these distinctions:
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Difference between information demands of shareholders and litigation
adversaries: Shareholders have a right to be informed about anything
that concerns their investment, and it is management’s duty to provide
that information. You should not be responding to shareholder requests
with litigation-style tactics to limit the information provided, as if you
were defending against legal claims.
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Difference between responsibilities of shareholders and prosecutors:
Shareholders are responsible for electing a company’s directors, based on
their determination that the directors can be relied upon to perform their
duties satisfactorily. The US Attorney has a very different
responsibility for investigating and prosecuting violations of law. It is
inappropriate for you to suggest that investors can rely upon the
prosecutor to assume any of the shareholders’ responsibility for
monitoring performance.
In this context, it should be understood that compliance with
laws, though critical, is only one of many elements in the operation of a
business. Your letter’s recitation of progress in satisfying conditions of
the Deferred Prosecution Agreement concerns conduct which the US Attorney is
expected to monitor, and therefore has no relevance to the current requests
for information about the aspects of director performance that shareholders
must monitor themselves.
On a similar subject, your suggestion that shareholders can rely
on the Special Litigation Committee (“SLC”) for information is especially
troubling. It is clearly misleading for you to quote excerpted phrases from
my letter in a manner that suggests I had endorsed the SLC rather than the
proposed process for cooperation with which the phrases were actually
associated in my letter.
And, as you know, the SLC is not in fact cooperating with the proposed
process for reporting information needed by shareholders. In any event, the
responsibility of the SLC relates to civil litigation claims against
directors for breaches of duties, just as the responsibility of the US
Attorney relates to criminal prosecution, and that SLC responsibility is in
the same way different from the shareholder’s responsibility for monitoring
the broader performance of directors – including those serving on the SLC.
Your reference to the delivery of “150 pages” of records to the
Delegate’s attorneys could misleadingly suggest compliance with the
shareholder demand. (You are correct in observing that my August 4 letter
mistakenly stated that “none of the records” had been delivered. I did not
learn until later that a box had been delivered on the evening of August
3.) I understand that what was delivered was a management selection of
board and audit committee minutes addressing only two subjects, the
settlement of shareholder litigation claims and the investigations conducted
by the US Attorney and SEC, and that even these were “redacted” for
information claimed to be privileged or confidential in spite of the
executed confidentiality agreement. Providing what seems to be a duplicate
of some court-ordered response to litigation discovery certainly does not
satisfy the Delegate’s demand. Someone with your experience must know that
it would be necessary to review all the minutes, including those of all the
committees, to determine what the directors did, or failed to do. And,
obviously, the management being monitored cannot be allowed to select the
information it wants shareholders to review.
Much of your letter is devoted to repetitions of diversions from
past letters to which I have previously responded.
I should not have to remind you that reports of your current efforts to
avoid prosecution and your scores for recently adopted governance features,
while appreciated, have no relevance to a shareholder’s review of director
performance during the period of admitted misconduct from 1998 to 2004.
Similarly, the first time you expressed concern about securities laws
relating to selective disclosure of confidential information, I assured you
that the need to comply with these and other rules had been addressed in my
initial communications about investor information requirements and in the
shareholder Delegate’s initial demand letter. Now, if you really have any
genuine concern about this issue, you should discuss it with the lawyers
representing CA who executed the suggested confidentiality agreement.
Finally, you have apparently been misinformed about a request
for “a special role as a shareholder representative.” The only role I am
willing to play is described in the statement of “Conditions of
Participation” which has been posted on the CA Forum web site since the
program began, following the same general policies as all other Forum
programs.
Noting that your letter referred to a section of the Deferred
Prosecution Agreement requiring the development of procedures for responding
to shareholder inquiries, and also to the Independent Examiner’s
responsibility for reviewing and reporting your progress, I will of course
welcome any questions Mr. Richards may have about satisfying investor needs
for information.
Sincerely yours,
Gary Lutin
cc: Lee S. Richards, Esquire
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