Computer Associates has accepted responsibility for the executives’ conduct and agreed to pay $225m in compensation to shareholders, in a bid to defer company prosecution.
According to the charges, in the fiscal 2000 Kumar and former head of worldwide sales, Stephen Richards, along with others, allegedly took part in a ‘systemic, company-wide practice’ of falsely and fraudulently recording and reporting unsigned license agreements, within quarterly revenues.
An internal investigation undertaken by CA’s audit committee found that $2.2bn of revenue was booked prematurely.
A 10-count grand jury indictment delivered last Friday also charged Kumar with making false statements to law enforcement officers and Richards with perjury.
‘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 James B. Comey.
‘If proven true, such a conduct cannot be tolerated and the Corporate Fraud Task Force’s track record shows that it will be met with severe penalities.’
He added that CA’s agreement with the Department of Justice and the Securities and Exchanges Commission does not protect individuals from prosecution.
Former general counsel Stephen Woghin also pleaded guilty yesterday to charges of securities fraud conspiracy and obstruction of justice.
‘Former members of CA’s management were engaged in illegal activity,’ said CA chairman Lewis Ranieri. ‘Violations of law and ethical standards, including securities fraud, obstructing a government investigation, and lying to CA’s Board of Directors and CA’s lawyers cannot be condoned.’
‘We fully support the government’s efforts to bring all responsible parties to justice.’
The magnitude of the accounting fraud became apparent on 26 April, 2004, when CA filed forms with the Securities and Exchange Commission restating financial data for the financial years 2000 and 2001.
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