Computer Associates Ex-CEO Pleads Guilty to Business Fraud
Sanjay Kumar, the former CEO of Computer Associates International Inc., pleaded guilty on Monday to obstruction of justice and securities fraud charges in a massive accounting scandal at the Long Island-based software company.
According to a 2004 indictment, Kumar was so involved with adding false revenue to a financial quarter even after it closed that he flew on a corporate jet to Paris in July 1999 to finalize a $19 million deal and signed a contract that had been backdated.
The indictment also charged that executives instructed salespeople to complete deals after the quarter had closed -- a practice known within the company as the "35-day month" -- and "cleaned up" contracts by removing time stamps from faxes.
"Your honor, my conduct was wrong. I take responsibility for participating in this practice, and I apologize for my actions," Kumar told the judge, referring to the accounting fraud.
The company's former head of worldwide sales, Stephen Richards, pleaded guilty to the same charges in federal court in Brooklyn. He and Kumar left the courthouse without speaking to reporters.
The guilty pleas "are a culmination of the government's successful investigation into a culture of corruption and fraud at Computer Associates," U.S. Attorney Roslynn Mauskopf said in a statement.
Five other top executives had previously pleaded guilty.
Kumar, 44, and Richards, 41, remain free on $5 million bond while awaiting their Sept. 12 sentencing. The law allows a maximum sentence of 20 years in prison for the offenses, but the term could be substantially less under federal sentencing guidelines.
Kumar also is a co-owner of the New York Islanders hockey team.
Computer Associates, which makes software and storage systems for large corporations, agreed in 2004 to pay $225 million to shareholders in a settlement letting it defer criminal prosecution. An outside monitor is tracking its financial reporting, and the company is reviewing past financial filings. Computer Associates would face no prosecution if it follows terms of the deferral agreement for 18 months.
Computer Associates restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked.
During the company's fiscal year 2000, it "prematurely recognized" more than $1.4 billion in revenue from at least 116 contracts that had not yet been signed, the Securities and Exchange Commission said.
The Islandia, N.Y.-based company has said it had billions of dollars in annual revenue in the late 1990s. Reported revenues plunged after the company changed its accounting practices in the face of increased outside scrutiny.
After the FBI began investigating the company in 2002, Kumar and Richards orchestrated a cover-up that involved lying under oath about the "35-day month" and other frauds and trying to buy the silence of a potential witness, authorities said.