Two former Computer Associates executives settled Securities and Exchange Commission charges that they participated in a widespread practice that resulted in the software maker's improper recognition of revenue.
Without admitting or denying the SEC's charges, CPAs and former CA vice presidents of finance David Rivard and David Kaplan agreed to give up "ill-gotten gains" and to pay civil penalties. Rivard, 36, of East Setauket, N.Y., agreed to give up $83,700 in ill-gotten gains and interest and to pay a $75,000 civil penalty. Kaplan, 38, of Melville, N.Y., agreed to disgorge $128,770 and to pay a $100,000 civil penalty. Rivard and Kaplan both previously agreed to be barred from serving as an officer or director of a publicly held company and to permanent injunctions against violating securities laws.
The SEC alleged that Rivard and Kaplan violated securities laws and are liable for aiding and abetting CA's violations of securities laws. CA violated generally accepted accounting principles by prematurely recognizing revenue from software contracts that had not yet been consummated during at least its fiscal year 2000, according to the SEC.
In late September, CA's former chief executive, Sanjay Kumar, was indicted on charges of securities fraud, conspiracy and obstruction of justice, just as the company reached agreements with the Department of Justice and the SEC in connection with the scandal that caused it to restate $2.2 billion in revenue.
In order to resolve DOJ and SEC investigations into improper revenue recognition and related reporting practices from 1998 to 2000, CA agreed to establish a restitution fund of $225 million to compensate present and former shareholders, and to continue to cooperate with the government and to help investigators recover compensation from present or former CA officers or employees who engaged in improper conduct while employed at CA. The company also agreed to strengthen its corporate governance, management team, and financial reporting and processes, and to enhance its compliance and ethics training.
The company also struck a deal with the U.S. Attorney's Office that allowed it to defer prosecution for 18 months. That deal also said that if CA complies 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.
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