Kumar Pays Price for CAs Dismal Integrity

Another big shoe dropped in the continuing investigation of accounting irregularities at Computer Associates when former CEO Sanjay Kumar disclosed June 4 that he is leaving the company.

Its another indication that more weighty shoes are likely to come clunking down on Computer Associates International Inc.s headquarters as the investigation continues and federal investigators disclose what sort of litigation, prosecution or sanctions they may bring against the company.

/zimages/2/28571.gifClick hereto read about Kumars announcement that he is leaving Computer Associates.

After resigning as chairman and CEO in April, Kumar was invited to stay on as CAs chief software architect, an expression by the companys directors that they didnt hold him personally responsible for the accounting troubles that resulted in the firing of nine employees from CAs finance and legal departments.

It was also an expression of the respect the company had for Kumars influence with customers and shareholders and his contribution to the company.

But this gesture only delayed the inevitable. His decision to leave now is a wise one, but long overdue. CA can never really demonstrate that it has put its long history of accounting improprieties behind it until it severs all connections with the people at the top who actively or tacitly allowed these activities to continue unchecked.

Its another indication that CA is signaling to federal authorities that it is highly motivated to resolve the federal Securities and Exchange Commission investigation of the companys accounting practices.

Kumars sudden decision to leave the company altogether raises questions about what talks may be going behind the scenes between federal investigators and CAs board of directors.

Next Page: CA has set aside $10 million for settling potential sanctions.

Setting Cash Aside

The company has already disclosed that it has set up a $10 million reserve to cover potential costs of settling any legal sanctions that federal authorities may impose.

/zimages/2/28571.gifClick hereto read John Pallattos commentary on CAs decision to set aside $10 million.

In the five weeks since stepping down as CEO, Kumar gave every indication that he was looking forward to a lengthy tenure working with customers in his role as chief software architect.

He denied that his decision to stay would be a distraction from the companys efforts to resolve its legal issues.

It could very well be that Kumars departure is part of the price federal authorities are demanding to resolve the investigation.

Even with his departure, Kumar is still as much under a cloud as his former employer. The SEC investigation has already resulted in guilty pleas from three former senior CA executives on fraud conspiracy charges. More indictments may still be in the offing.

CA seems to be finally waking up to the reality that it has a lot of work to do before its history of fast and loose accounting becomes a fading memory. But to do that, CA will have to demonstrate that its more virtuous than the average corporation in all of its business practices.

As respected as he was as the manager who guided CA into new markets and allowed it to make an orderly retreat from mature product lines, Kumar was still closely identified with the arrogant, old regime that led the company into its current troubles.

While he may have been content to remain with CA in the role of corporate elder statesman, its clear that any benefit he brought to the company was far outweighed by the dismal record of management integrity that CA compiled without reform during his watch.

eWEEK.com Enterprise Applications Center Editor John Pallatto is a veteran journalist in the field of enterprise software and Internet technology.

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