Dallas - High-profile Texas investor and entrepreneur Sam Wyly has filed an $80 million suit against Big Four firm Ernst & Young, charging that the firm's audits of troubled Computer Associates influenced his decision to sell his company, Sterling Software, to CA in a stock transaction.Wyly's suit, which was filed in Texas District Court here, said that he relied on E&Y audits for CA's fiscal 1999 to sell his company to the concern for stock. Roughly one month later CA's shares plunged some 12 percent when its earnings reports were delayed, and then fell further when the company failed to make its earnings forecast. Computer Associates replaced E&Y in 1999 with Big Four rival KPMG.
"We believe the case is without merit," said an E&Y spokesman.
Computer Associates ultimately became mired in a $2.2 billion accounting fraud, a scandal that led to the ouster of several members of its top management, including chief executive Sanjay Kumar. The company had been backdating purchase orders and keeping the books open past the period close.
Recently, the company named former Dell executive Robert W. Davis as executive vice president and chief financial officer, replacing Ira Zar, who last year pleaded guilty to securities fraud.
In late February, interim chief executive Kenneth D. Cron, who was picked to replace Kumar, stepped down, and president and CEO-elect John Swainson assumed the reins of the Islandia, N.Y.-based company.
The suit marks the latest go-round for Wyly in his battles with CA and related parties. Four years ago, he led a proxy battle to unseat management, and later filed another suit in an attempt to have management return their bonuses.
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