CA's ex-CEO Kumar Indicted

As the indictment was unsealed today by the U.S. Justice Department, CA officials revealed that the company will pay $225 million to compensate CA shareholders for losses caused by the improper practices.

"Some former members of CA's management engaged in illegal activity," says CA chairman Lewis Ranieri. "Violations of law and ethical standards, including securities fraud, obstructing a government investigation and lying to CA's board of directors and lawyers, cannot be condoned."

More important for its VAR partners, CA appears to have insulated itself from significant turmoil, at least for the near term, via an agreement the company has inked with the office of the U.S. Attorney for the Eastern District of New York.

Under that pact, the U.S. Attorney's Office will recommend to the U.S. District Court that prosecution of CA be deferred for at least 18 months. Along with its $225 million restitution fund, CA's obligations under the deal are to provide active assistance to government investigators and to take steps to strengthen its corporate governance practices.

Among CA's resellers, today's news is seen as a big step toward getting past the scandal.

"I am sorry to hear this, but in the same breath I guess CA has been waiting to put things behind them," says Todd Pekats, national director of strategic alliances at CompuCom Systems, a CA partner. "Hopefully this will end lots of speculation and we can go back to focusing on business as usual."

Asked if paying out nearly a quarter of a billion dollars would result in any immediate layoffs, CA interim CEO Ken Cron told a press conference this afternoon: "With regard to any particular actions that the company is going to take, we're not going to comment, but be assured that we're continually evaluating [our cost structure]."

In addition to indicting ex-CEO Kumar, the Justice Department charged former head of worldwide sales Stephen Richards with securities fraud and obstruction of justice. The pair each face maximum sentences of 100 years. No trial date has been set.

According to the Justice Department, Kumar and Richards fraudulently reported licensing revenues by toting up sales of software that hadn't actually been finalized during the quarter.

"I'm sorry to hear about Sanjay, because I believe he was very passionate and dedicated to the business," CompuCom's Pekats says.

In today's press conference, CA's Ranieri served notice that CA hopes to move past the scandal as fast as it can.

"With these agreements, CA has taken a critical step in closing this deeply troubling chapter in its history," Ranieri says. "On behalf of the company and all its employees, we tender our sincere apologies to our shareholders and customers."

A big action item on its agenda to push the scandal to the back burner is the naming of a full-time CEO. When Cron, who was formerly president of publishing at VARBusiness' owner, CMP Media, signed on to run CA, he emphasized that his post would be interim. However, in recent weeks, Cron's channel-friendly management style has gained support and he's now touted in some quarters as a strong candidate to fill the CEO slot on a full-time basis.

Jeffrey Schwartz contributed to this story