April 24 (Bloomberg) -- Sanjay Kumar, former chief executive officer of Computer Associates International Inc., pleaded guilty to charges he led a $2.2 billion accounting fraud at the company, two weeks before he and an ex-colleague were to begin trial.

Kumar, 44, and his co-defendant, former sales executive Stephen Richards, 41, entered guilty pleas before U.S. District Judge I. Leo Glasser, in federal court in Brooklyn, New York. The two men, who were scheduled to stand trial on May 8, pleaded guilty to all the charges against them in the 2004 indictment.

Kumar and Richards were charged with illegally inflating revenue at Islandia, New York-based Computer Associates in 2000 by backdating contracts. In 2004, the company, now known as CA Inc., agreed to make corporate governance changes and pay $225 million in restitution to avoid criminal prosecution. CA is the No. 2 maker of mainframe computer software.

Jacob Frenkel, a former Securities and Exchange Commission attorney now in private practice, said the case against Kumar and Richards may have been simpler to prove than the fraud charges against former Enron Corp. executives Kenneth Lay and Jeffrey Skilling. ``Here there is a trail of smoke coming out of the cannon,'' Frenkel said. ``It's big and obvious, and for that reason they decided to accept responsibility.''

Frenkel said Kumar and Richards ``likely foresaw an unfavorable outcome'' if the case went to trial. ``The winner is CA. They worked hard to put the Kumar days behind them. This brings closure.''

Wiped Hard Drive Clean

Kumar's decision to change his plea came as he was awaiting a ruling by Glasser on whether to admit government evidence that he wiped his computer's hard drive clean after the company told him to preserve data for investigators. Prosecutors said Kumar reformatted his computer with a new operating system after the government launched a probe of Computer Associates in 2002.

In court today, Kumar told Glasser he was ``aware of the practice'' at Computer Associates of recognizing revenue in one quarter that was earned in prior quarters, to meet Wall Street expectations. ``I knew this practice of recognizing revenue was wrong,'' he said. ``I also knew it would mislead those who purchased CA stock.''

He said he took ``full responsibility. I apologize for my actions.''

Richards, a native of New Zealand who Glasser said could face deportation because of his conviction, also apologized ``for misrepresentations I've made in the past. I recognize they may have been inappropriate.''

90 Years

Kumar faces a maximum of 90 years in prison. Richards faces 50 years. Glasser scheduled sentencing for Sept. 12.

John P. Cooney, Kumar's lawyer, said, ``I have no comment,'' when asked why his client pleaded guilty today. Kumar declined to comment.

Kumar's spokesman, Gary Lewi, said that ``Mr. Kumar is now focused on helping his family get through this difficult period.''

David Zornow, Richards' attorney, said he had ``no comment.''

Brooklyn U.S. Attorney Roslynn Mauskopf, whose office prosecuted the case, said that by lying about Computer Associate's finances, the two men violated shareholders' trust and federal law.

`Massive Cover-Up'

``They then compounded those lies, and further damaged the corporation over a massive cover-up,'' Mauskopf said.

Kumar and Richards were charged on Sept. 20, 2004, with securities fraud, conspiracy and lying to federal officials. Kumar was also indicted on an obstruction-of-justice charge. He was accused of paying $3.7 million to buy the silence of an executive who threatened to report an improper transaction.

After the pleas were accepted, prosecutors disclosed that former CA senior vice president Thomas Bennett had been arrested April 21 on charges he conspired with Kumar ``to buy that businessman's silence.''

Bennett's lawyer, Michael Ross, couldn't immediately be reached to comment.

Federal prosecutors said Computer Associates used a ``35-day month'' to artificially extend financial reporting periods in order to make it appear the company ``met or exceeded revenue expectations.''

Fled Sri Lanka

Kumar came to the U.S. in 1976 at age 14 from Sri Lanka, fleeing the violence in his home country between the Tamils and Sinhalese. He settled in South Carolina with his family.

Kumar has said his parents hoped he'd become a doctor and were disappointed when he dropped out of Furman University in Greenville in his junior year to work in the computer industry.

Kumar joined Computer Associates with founder Charles Wang's 1987 purchase of Uccel Corp., a Dallas maker of systems management programs, at which he helped oversee software development.

Wang took an interest in Kumar, an immigrant and computer enthusiast like himself.

Several months after Kumar joined Computer Associates, Wang asked him to move to New York from Dallas and named him vice president of planning. In 1994, Wang replaced his own brother, Tony -- who'd retired two years earlier -- by promoting Kumar to president and chief operating officer.

The two men were rarely apart. Wang often told colleagues that Kumar was able to fill in for him during meetings if Wang had to leave early.

Restricted Stock

In 1998, Wang paid himself, Kumar and Executive Vice President Russell Artzt $1.1 billion in restricted stock. The trio cashed in on a 1995 shareholder-approved incentive plan that required CA shares to close above $53.33 for a total of 60 days in the preceding one-year period.

On July 21, 1998, Wang, 61, disclosed a $675 million after- tax charge for the payment, sending CA shares plunging 31 percent the next day.

Kumar became president and chief executive officer in August 2000 and took over as chairman on Nov. 18, 2002, when Wang retired. Kumar stepped down from those posts in April 2004, after the company admitted it had backdated contracts, and was named chief software architect.

A week later Computer Associates restated $2.2 billion in revenue, the amount of sales prematurely booked. Kumar quit the company on June 4, 2004, and was indicted Sept. 22 of that year, a day after Computer Associates agreed to the $225 million fine and 18 months of probation to settle the government probe.

In November 2004, John Swainson joined the company as president and was named chief executive in February 2005. The company legally changed its name to CA Inc. in February.

CA spokeswoman Jennifer Hallahan declined to comment.

Kumar still faces a civil fraud suit filed by the U.S. Securities and Exchange Commission in September 2004. No settlement has been reached in the case, and the agency will continue to litigate it, according to John Nester, an SEC spokesman in Washington.

CA shares fell 25 cents to close at $25.51 in New York Stock Exchange composite trading.

The case is: U.S. v. Kumar, 04-CR-846, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in New York at (1) rvanvoris@bloomberg.net.

Last Updated: April 24, 2006 19:41 EDT