CA Channel Partners: Business Goes On
"I don't think there will be any change with the way CA operates in the channel," said Ken Schwartz, CIO and security practice leader at Western New York Computing Systems, an MSP and CA partner based in Pittsford, N.Y. "CA reps were just in here today and they are totally committed to the channel, and everything we hear from them says they will continue to invest in the reseller community, creating relationships and bringing product to market."
Added Sanford Cohn, general manager of Advanced Technology Solutions Group, a CA partner in Albany, N.Y.: "I don't think it will make any difference in the performance we are seeing from CA."
CA reached a settlement with federal prosecutors that could protect the Islandia, N.Y.-based technology vendor from further prosecution related to the vendor's admitted improper accounting practices.
Word of CA's $225 million settlement came late Wednesday, about the same time a 10-count New York Grand Jury indictment was unsealed charging CA's former CEO, Sanjay Kumar, and former head of worldwide sales Stephen Richards with securities fraud, conspiracy and obstruction of justice. A spokesman for the U.S. Department of Justice confirmed the indictment of Kumar and Richards.
Federal prosecutors had charged that CA illegally inflated sales revenue between Jan. 1, 1998, and Sept. 30, 2000. CA's own internal audit recently confirmed that such wrongdoing did take place. CA's former CFO, Ira Zar, and two senior vice presidents of finance have already pled guilty.
Under the settlement, the company will have the federal case against it deferred for a period of 18 months while it demonstrates that it has complied with the settlement's requirements. CA has been ordered to set up a restitution fund to the tune of $225 million to repay past and present shareholders for "losses caused by the misconduct of certain former CA executives," according to CA. The company must also assist government investigators in their effort to retrieve compensation paid to former CA executives who were awarded bonuses based on the inflated accounting. Visibly enhanced corporate governance efforts and ethics training are also conditions of the settlement.
"The U.S. Attorney's Office will recommend to the U.S. District Court that prosecution of CA be deferred for a period of 18 months following the appointment of an independent examiner or, until the independent examiner's work is completed, whichever is later," said Chairman Lewis Ranieri. "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 also must assist government prosecutors in their efforts to bring those charged with orchestrating the accounting scandal to justice. "This conduct was wrong," said Ranieri. "We fully support the government's effort to bring wrongdoers to justice. Those responsible for these [accounting scandal] actions are no longer with the company."
The settlement with federal prosecutors also settled the case between CA and the Securities and Exchange Commission regarding the company's past accounting practices, according to CA.
The $225 million restitution fund will be overseen by a newly appointed CA administrator. The payout will be made in three installments of $75 million each, the first installment going out "30 days after the date of approval," said CFO Jeff Clarke.
CA will reorganize its finance department and appoint a financial controller for each of CA's business departments, Clarke said.
Interim CEO Ken Cron said the settlement represented a new day for CA. "We are a much more different company than we were a year ago. Change will continue at CA. I guarantee that."
Asked if the settlement would increase the pool of potential candidates vying for the permanent CEO position, Ranieri said, "It's not a matter of the pool expanding. What CA is is very well-known at this point. All the candidates, including Ken [Cron], know the reality of the company." Ranieri added that he hoped a decision on a permanent CEO would come "very shortly."