CA, DOJ Find Ways Around Further Prosecution

The software maker strikes a deferred prosecution deal with the government to avoid a securities fraud and obstruction trial. The company will help investigators on the case against former employees and top brass.

Computer Associates International Inc. took a big step toward putting the long-running investigation by the U.S. Department of Justice and Securities Exchange Commission behind it. The software maker on Wednesday struck a deferred prosecution deal with the government.

At the same time, the government indicted former Chairman and CEO Sanjay Kumar on federal securities fraud and obstruction charges. As part of its deal to save itself from prosecution, officials of the Islandia, N.Y.-based CA said the company is cooperating with officials in the investigation of Kumar.

Under the agreement, CA will establish a $225 million restitution fund for current and former shareholders; help the government try to recover compensation from present or former CA officers or employees who participated in the accounting fraud and cover-up; and agreed to be monitored by an independent examiner over 18 months to insure that CA stays in compliance with its agreement. After the 18 month period, if it is deemed CA operated in compliance with its agreement, charges will be dismissed.

/zimages/5/28571.gifCA will have to demonstrate to customers and the market that its more virtuous than the average corporation in all of its business practices, according to eWEEK.coms Enterprise Applications Center Editor John Pallatto. Click here to read more.

CA will take additional steps to insure its accounting practices remain legal and comply with its agreement, including the appointment of a chief accounting officer, the appointment of two additional independent directors to its board and the creation of a compliance committee,

"Change will continue at CA. We are committed to strengthening the management team. We are also committed to continue to work with the government to insure CAs compliance with the deferred prosecution agreement," said interim CEO Ken Cron in a conference call in the afternoon. "We intend to move swiftly to make corporate governance changes. Our SEC filings will be accurate and complete," he added.

Also indicted on Wednesday was former head of sales Stephen Richards on the accounting irregularities and cover-up, and former general counsel Steven Woghin, who plead guilty to similar charges.

In April, the company fired a number of executives and gutted its finance and legal departments after a board of directors audit committee investigation showed problems with accounting irregularities. These departures were capped by the resignation of founder, chairman and CEO Kumar.

/zimages/5/28571.gifCheck out eWEEK.coms Enterprise Applications Center at for the latest news, reviews and analysis about productivity and business solutions.


Be sure to add our enterprise applications news feed to your RSS newsreader or My Yahoo page