Newsday and the Wall Street Journal reported this week that Sanjay Kumar, the former president and CEO of CA who is currently serving a 12-year sentence for his involvement in a $2.2 billion accounting scandal in 2004, has implicated several current and former directors in the scandal.
Kumar alleged in an affidavit filed on August 27 in the U.S. District Court in Brooklyn, New York, that several current and former directors of CA, including Charles Wang, co-founder and former CEO of CA, and Alfonse D'Amato, a former U.S. Senator, knew about CA's fraudulent accounting practices, the newspapers said.
Kumar also claimed that those directors helped hide information from investigators, the newspapers wrote. Spokesman for Wang and D'Amato vigorously denied the allegations, Newsday reported.
The statement was filed by Kumar in response to requests from lawyers for Texas billionaire Sam Wyly in connection with lawsuits that were filed on behalf of CA shareholders, according to the Wall Street Journal. Everything Channel examined the statement, which was available on-line on Newsday's Website.
In the statement, Kumar said that it was common practice at CA to engage in the "35-Day Month," a practice under which the company's fiscal quarters started and ended about five days late. The practice allowed the company to include within one quarter's fiscal report licensing revenue from agreements signed in the first few days of the following quarter.
Kumar also cited specific customers whose license revenue was counted improperly as a result of the "35-Day Month."
Wyly was one of CA's largest shareholders as a result of the acquisition of his former company, Sterling Software, by CA in 2000. Wyly fought for a seat on the CA Board of Directors in 2002.
In 2004, CA, known as Computer Associates at the time, restated its financial results from 2000 and 2001 to reflect $2.2 billion in improperly booked revenue. It agreed to pay $225 million to shareholders in late 2004 in order to settle its part in the case, defer criminal prosecution, and settle SEC charges of securities fraud.
A Federal judge in May of 2007 dismissed all pending charges against CA related to the scandal after an independent examiner issued a report May 1 that found CA had complied with the terms of a 2004 Deferred Prosecution Agreement with the U.S. Attorney's Office for the Eastern District of New York.
Kumar was sentenced to a 12-year prison term in November 2006 for his involvement in the scandal. He started his sentence in August of 2007.
Kumar and co-defendant Stephen Richards, once a top CA sales executive, each entered guilty pleas in April of 2006 after initially pleading not guilty. Kumar that month recognized his participation in the $2.2 billion accounting fraud that has rocked the company and much of its senior management.
CA, when asked to comment on the allegations, emailed the following statement to Everything Channel:
"The Special Litigation Committee of the Board of Directors conducted a thorough, multi-year investigation that included interviews with Mr. Kumar, along with conducting ninety interviews of CA's current and former directors, officers, employees, and outside advisors; reviewing millions of pages of documents; and, hiring four expert consultants, to produce two comprehensive reports that have been released to the public.
"The SLC made every effort to investigate and corroborate the information used for its report, and directed the Company to take action based on that report. In a matter of this complexity, one cannot draw conclusions from the uncorroborated recollections of a single individual.
"The Company has and continues to implement the recommendations of the SLC. CA believes that these matters, which are pending in the legal system, are best resolved by the courts. Therefore, any further comment would be inappropriate."
Damon Poeter, Dan Neel, and Jennifer Follett contributed to this article.