Sanjay Kumar, the former chief executive of Computer Associates International Inc., was indicted on charges of securities fraud, conspiracy and obstruction of justice just as the company announced that it had reached agreements with the Department of Justice and the Securities and Exchange Commission in connection with an accounting scandal that caused it to restate $2.2 billion in revenue.

According to the 10-count grand jury indictment, Kumar and other CA executives, including former head of worldwide sales Stephen Richards, "engaged in a systemic, company-wide practice of falsely and fraudulently recording and reporting within a fiscal quarter revenue associated with certain license agreements, even though those agreements hadn't been finalized and signed during that quarter," in a practice, known as the "35-day month" or the "three-day window," which involved artificially extending months.

Amid the unfolding accounting scandal, Kumar stepped down as CEO, resigned from the company's board in April, and took on the post of chief software architect. He parted ways with the company in June.

CA agreed to establish a restitution fund of $225 million to compensate present and former CA shareholders for losses to resolve DOJ and SEC investigations into improper revenue recognition and related reporting practices from 1998 to 2000.

"Under the terms of the agreements, CA has accepted full responsibility for its conduct during the period ... and for impeding and failing to cooperate with the investigation by the Department of Justice and the Securities and Exchange Commission," the company said in a statement.

CA also agreed to continue to cooperate with the government, to help investigators recover compensation from present or former CA officers or employees who engaged in improper conduct while employed at CA; to strengthen CA's corporate governance, management team, and financial reporting and processes, and to enhance its compliance and ethics training.

Under a deal with the U.S. Attorney for the Eastern District of New York, the U.S. Attorney's Office will recommend that prosecution of CA be deferred for 18 months following the appointment of an independent examiner or until the independent examiner's work is completed.

"If it is determined after that time period that CA is in material compliance with all of its obligations under the agreement, the U.S. Attorney's Office will seek dismissal with prejudice of the charges and the agreement will expire," CA said.

"With these agreements, CA has taken a critical step in closing this deeply troubling chapter in its history," said CA chairman Lewis Ranieri. "On behalf of the company and all its employees, we tender our sincere apologies to our shareholders and customers."

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access