CA Chief Pleads Guilty

Sanjay Kumar, the software maker's former top executive, admits to securities fraud in a case that was to go to trial in May

The accounting scandal at software maker CA that began as a low-key federal investigation four years ago ended Apr. 24 when former CA chief executive Sanjay Kumar pleaded guilty to charges of securities fraud and obstruction of justice. Former CA sales chief Stephen Richards also pleaded guilty. The two were scheduled to go on trial in May in Brooklyn, N.Y.

Kumar and Richards are among seven former CA (CA) executives and managers who have pleaded guilty to related charges in what was one of the larger accounting fraud cases brought by the government since the tech bust. Other high-ranking executives who earlier pleaded guilty include former chief financial officer Ira Zar, former general counsel Steven Woghin, and former finance executive Lloyd Silverstein. Silverstein started the house of cards tumbling when he began to cooperate with the government in January, 2004.

OTHER CHARGES?

  The government says CA executives routinely kept the company's books open after the ends of quarters in an effort to increase revenues and meet the expectations of Wall Street analysts. Over a three-year period, the company incorrectly reported $2.2 billion in revenue. Then, the government says, executives lied to investigators and withheld evidence in attempts to cover up their crimes. In court, Kumar acknowledged the actions were wrong, but said he "downplayed the activity because it didn't involve double counting of revenues." Neither executive would comment to BusinessWeek Online.

A question that remains unanswered is whether founder and former CEO Charles Wang will be drawn into the matter. In a statement, Kumar said he became aware of the practice of keeping the books open in July, 1999, about a year before he became CEO. Wang had been CEO at the time and stayed on as chairman until his departure in 2002 . He has not been charged in the case, and couldn't immediately be reached for comment.

Prosecutors declined to comment when asked whether the investigation is continuing, and in particular about Wang. In 2004, the company agreed to a deferred prosecution agreement with the government.

POSSIBLE PRISON TIME.

  Since the indictments began, almost the entire CA senior management team has been replaced. John Swainson, a former IBM (IBM) executive, was brought in as president in late 2004 to add stability and credibility. He later became chief executive.

Kumar had been an American success story. Raised in strife-ridden Sri Lanka, he came to the U.S. with his parents at age 14 and they settled in rural Greenville, S.C. He discovered computers in high school and dropped out of Furman University to start a small software company. He later joined UCCEL, a Texas software company which CA bought in 1987.

Kumar was promoted first to president and then to CEO. Wang resigned from the company after losing a boardroom battle with Kumar. Richards and Kumar are due to be sentenced on Sept. 12. Each could face as long as 65 years in prison. In all, more than a dozen executives have quit or been fired in relation to the fraud case.