Sanjay Kumar, the former chief executive officer of CA Inc., pleaded guilty yesterday to securities fraud and obstruction of justice charges related to a $2.2-billion (U.S.) accounting fraud at the software company.
Mr. Kumar, who left Computer Associates International Inc., the company's former name, in June, 2004, acknowledged his role in improperly booking revenue at the company to meet Wall Street expectations. In a written statement that Mr. Kumar read in court, the former CEO said: "I know my conduct was wrong . . . I apologize for my actions."
According to a 2004 indictment, Mr. Kumar was so involved with adding revenue to a financial quarter even after it closed that he flew to Paris in July, 1999, to complete a 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 and "cleaned up" contracts by removing time stamps from faxes.
The law allows a maximum sentence of 20 years in prison for the offences, but the term could be substantially less under federal sentencing guidelines.
Stephen Richards, the former head of sales at Computer Associates, also pleaded guilty to securities fraud and obstruction of justice charges at a hearing before Judge Leo Glasser in U.S. District Court in Brooklyn.
Mr. Kumar and Mr. Richards were both named in a nine-count indictment with eight charges against each executive. The charges range from conspiracy to commit securities fraud, conspiracy to obstruct justice and obstruction of justice.
Mr. Kumar faces a maximum of 90 years in prison. Mr. Richards faces 50 years. Judge Glasser scheduled sentencing for Sept. 12.
Both men initially pleaded not guilty to criminal charges in September, 2004.
Federal prosecutors said Computer Associates used a "35-day month" to extend financial reporting periods in order to make it appear the company "met or exceeded revenue expectations."
Mr. Kumar came to the United States in 1976 at age 14 from Sri Lanka, fleeing the violence in his home country between the Tamils and Sinhalese. He settled in South Carolina with his family.
He has said his parents hoped he'd become a doctor and were disappointed when he dropped out of Furman University in Greenville in his junior year to work in the computer industry.
Mr. Kumar joined Computer Associates with founder Charles Wang's 1987 purchase of Uccel Corp., a Dallas maker of systems management programs, at which he helped oversee software development.
The two men were rarely apart. Mr. Wang often told colleagues that Mr. Kumar was able to fill in for him during meetings if Mr. Wang had to leave early.
In 1998, Mr. Wang paid himself, Mr. Kumar and vice-president Russell Artzt $1.1-billion in restricted stock. The trio cashed in on a 1995 shareholder-approved incentive plan that required CA shares to close above $53.33 for a total of 60 days in the preceding one-year period.
