UPDATE: CA To Pay $225M To Avoid Prosecution

In addition, the company's former general counsel, Steven Woghin, pleaded guilty in federal court to conspiracy to commit securities fraud and obstruction of justice.

"Your honor, I am ashamed to be standing here today," he said. "It is entirely inconsistent with my behavior through a 30-year legal career."

Robert Giuffra, an attorney representing Computer Associates, called the company's settlement a "fair, balanced and just resolution of this deeply disturbing matter."

Former executives "betrayed the trust of the board, Computer Associates shareholders and 15,000 employees," he said, adding that the board of directors "fully supports the government's ongoing effort to bring all wrongdoers to justice."

The company had earlier offered to settle the investigation for $10 million.

The New York Post and The New York Times reported Wednesday that the company's former chairman and chief executive, Sanjay Kumar, also was expected to face criminal and civil charges, which would include securities fraud.

Computer Associates, the world's fourth-largest software maker, restated its financial results from 2000 and 2001 in April to reflect $2.2 billion in revenue that was improperly booked.

Three former executives admitted that month that they fraudulently recorded hundreds of millions of dollars worth of contracts in a conspiracy to inflate quarterly earnings. Prosecutors referred to one practice as the "35-day month" because company accountants would extend the booking of revenue in the final month of a fiscal quarter days beyond the true end of the month.

The executives entered guilty pleas under cooperation agreements that prosecutors called an important move toward indicting other high-ranking company executives.

Former chief financial officer Ira Zar, the third-highest-ranking executive after former chairman Charles B. Wang and Kumar, pleaded guilty to securities fraud and conspiracy to commit securities fraud and obstruct justice.

The company agreed Wednesday to help the government retrieve any compensation and bonuses found to be awarded based on fraudulent financial results. Three executives, including Wang and Kumar, split stock bonuses worth $1.1 billion in 1998.

According to the charges against him, Zar regularly met with high-level executives whom prosecutors described as Executive No. 1 and Executive No. 2. Zar conspired with the two to backdate contracts to boost the previous quarter's earnings, according to the charges.

Prosecutors have declined to comment on the identities of those two executives.

Along with Zar, former senior vice president of finance and administration David Kaplan and former vice president of finance David Rivard pleaded guilty in April to conspiracy to commit securities fraud and obstruct justice.

Rivard and Kaplan faced maximum sentences of 10 years in prison but likely will be sentenced to far less because they cooperated with authorities. Zar faced a maximum of 20 years in prison but also is likely will be sentenced to less.

Woghin's sentencing was set for Dec. 10. He could get up to five years on the first count and up to 20 years on the second. Both counts are subject to federal sentencing guidelines.

The Securities and Exchange Commission also filed actions in April against Zar, Rivard and Kaplan, charging each of them with committing accounting fraud. The three struck separate deals agreeing to disgorge the proceeds of their crimes and never again serve as officers of publicly traded companies.

The SEC said that during the company's 2000 fiscal year, Computer Associates "prematurely recognized" more than $1.4 billion in revenue from at least 116 contracts that had not yet been signed.

The Long Island, N.Y.-based company said it had billions of dollars in annual revenue in the late 1990s. Reported revenue plunged after the company changed its accounting practices in the face of increased outside scrutiny.

Computer Associates said a company audit was to be completed soon and another restatement of prior financial statements would be done if required.

"Although the company is unable to predict the scope or outcome of the continuing government investigation, it is possible that it could result in the institution of administrative, civil injunctive or criminal proceedings, including charges against the company and other officers of the company," Computer Associates said.

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