Amid Turmoil, Computer Associates Moves Ahead

Legal troubles roil executive ranks amid major revamp of product lines.

Computer Associates International Inc., a company that is synonymous with corporate makeovers, is in the midst of perhaps its boldest reinvention yet.

As the software maker consolidates management offerings and sharpens its security, storage and wireless portfolio, the specter of federal corruption charges and executive shake-ups threatens to undo the reworking that many see as the shift from the old CA to the new.

Although CA officials in Islandia, N.Y., said the company remains focused on its technology and services, they said the continuing investigations and uncertainty surrounding CAs top brass are distracting.

Earlier this month, former CA Chief Financial Officer Ira Zar, along with two of CAs other senior financial executives, David Rivard and David Kaplan, pleaded guilty in federal court to charges of conspiracy to commit securities fraud and obstruct justice. Zar faces a maximum 20-year sentence, while Rivard and Kaplan each face a maximum 10-year sentence.

/zimages/1/28571.gifRead "Three Former CA Execs Plead Guilty to Fraud Conspiracy."

U.S. attorney Roslynn Mauskopf said the pleas demonstrate the corrupt culture of CAs management, uncovered after a two-year investigation. Meanwhile, large customers of CA, even as they back the companys technology efforts, said allegations of impropriety and the potential loss of CAs chief architect for change, CEO Sanjay Kumar, are giving them pause.

"Unfortunately, just the hint of wrongdoing tars everybody," said Terry Milholland, a longtime CA customer and recently retired CIO and chief technology officer at EDS Corp., of Plano, Texas. Its unsettling for customers to see executives such as Zar plead guilty to fraud, Milholland said.

"I hope the situation here is that the bad apples will move on and the company will be fine. This is not the old CA," he said.

While commenting little in public about the turmoil, CA did circulate a statement to employees in-house saying, in part, that officials could not "predict the scope or outcome of the continuing government investigation. It is possible that it could result in ... criminal proceedings, including charges against the company and other officers."

Sources close to the matter say fallout from the accounting scandal could include the ouster of Kumar by the companys board of directors. Kumar declined to comment for this story, and CA officials would not respond to questions about the investigations or the executive changes.

Next page: The irony in CAs wrongdoing.