Computer Associates Confirms Government Inquiries

The announcement came the day after the company disclosed it drew $600 million from a credit line to pay off another, leading to concerns about its ability to access debt markets.

CEO Sanjay Kumar said Friday that the U.S. Attorney's Office and the Securities and Exchange Commission have confirmed they have a preliminary inquiry under way.

"We are uncertain as to the topic," Kumar said. "We have asked to meet with both organizations. Obviously, we're still trying to determine the full scope of those inquires. We'd like to know what's going on."

Shares of Computer Associates, the world's No. 4 software maker, were down $3.92 at $14.89 in heavy morning trade, making the stock one of the worst percentage losers on the New York Stock Exchange.

Computer Associates has been battered recently by concerns ranging from its debt to its accounting practices, and the stock has lost about half of its value this month.

In the past week, Newsday has reported that the regulatory and law enforcement bodies were investigating whether Computer Associates recorded some of its maintenance agreements as software sales in order to boost its recorded revenue. The newspaper says its sources stressed that the probe was in its early stages and that there was no firm evidence that the company did anything illegal.

Representatives from all three U.S. government agencies have declined to comment on the reports.

The company said on Thursday it had planned to repay the credit line it had drawn upon with proceeds from a $1 billion planned bond offering. That offering was canceled earlier this month after Moody's Investor Service said it would review a possible downgrade of the company's credit rating.

Investors are increasingly sensitive to heavy debt loads and other corporate balance sheet issues, following the accounting scandal that blew up at energy trader Enron.

Investors are also watching the commercial paper market.

Debt concerns at No. 4 U.S. local telephone company Qwest Communications International Inc. and conglomerate Tyco International were surfaced when they chose to draw down bank credit lines because they couldn't raise money through the sale of short-term debt.

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