Former Computer Associates CEO Sanjay Kumar pleaded not guilty on Thursday in U.S. District Court in Brooklyn, New York, to charges of securities fraud and obstruction of justice involving a multi-billion dollar accounting scandal.
Stephen Richards, Computer Associates (CA) former head of worldwide sales also pleaded not guilty to charges of fraud and obstruction of justice. The company's former general counsel and a senior vice president, Stephen Woghin, pleaded guilty yesterday to similar charges for his participation in what government officials have described as a company-wide accounting fraud scheme.
On Wednesday the U.S. Department of Justice announced that Computer Associates was charged with the conduct of its former executives and has agreed to pay some US$225 million to compensate victims of the fraud.
If the company abides by the terms of the agreement through an 18-month period, the U.S. Attorney's office said they will not prosecute the company.
In its indictment the government said that at the heart of its case is the so-called "35-day month." The government claims Computer Associates made a systematic practice out of fraudulently recording and reporting within a fiscal quarter revenues associated with licensing agreements despite those agreements not having been finalized and signed during that period. According to the indictment both Kumar and Richards "personally advanced" the goals of the 35-day month practice.
In a Web conference held on Thursday Computer Associates chairman Lewis Ranieri said, "With these agreements, CA has taken a critical step in closing this deeply troubling chapter in its history." Ranieri said his company will actively assist government officials in an attempt to recover the compensation from any present or former CA officers involved in improper conduct at the company.
Computer Associates, which is the world's fourth largest software developer, has restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenues that was improperly booked. The U.S. Securities and Exchange Commission said that during the company's fiscal year 2000, Computer Associates "prematurely recognized" over $1.4 billion in revenue from at least 18 contracts that had not yet been signed.
In a statement released by his attorneys Kumar stated that he expects to be exonerated of all charges. Both Kumar and Richards could not be reached for comment.