Computer Associates said Monday morning that it had gotten one of those Wells Notices from the SEC basically saying that unless CA can somehow talk its way out of it in the next two weeks the SEC is going to take it to court for flouting the securities laws and booking revenues before the contracts were signed to gussy up its results in the year that ended March 31, 2000.

The SEC alleges that the contracts in question were printed with bogus dates or the dates were altered, according to the Wall Street Journal.

The investigation of CA by both the SEC and the Justice Department is now entering its third year, a huge distraction for any company. The only bright spot in the Wells Notice is that it may bring CA's accounting troubles to an end unless the SEC has other problems with earlier years. So far CA has offer up its CFO and a couple of other financial executives to an internal probe by its board that found that revenues were indeed prematurely recognized. Its senior VP of finance quit a few weeks ago and CA declined to say whether it had anything to do with any investigation.

The company also settled stockholder suits over accounting issues last month for 5.7 million shares and said it would take a charge of roughly $100 million to cover the settlement.

Credit Suisse, among others, thinks CA won't contest the charges, since it's admitted they're true already, and attempt to negotiate a settlement. The broker expects a rapid resolution.

CA's fiscal year 2000 is viewed as a watershed because it was the last year that the company booked all its revenues up-front. The next year it switched to subscription-based accounting, a move that has been suspected of masking a serious fall in revenues. Revenues are now half of what they used to be.

CA has also been suspected of jigging its numbers in the late ‘90s so three of its top executives including current CEO Sanjay Kumar could cash in on a $1.1 billion tied to the company's stock performance.

IBM got a Wells Notice last week and Wall Street folk are scratching their heads over why the SEC is making such a big deal over a comparatively minor $11 million transaction and what IBM meant when it said the SEC was still investigating how IBM recognized revenues from other customer transactions in 2000 and 2001.

• CA to Remove its General Counsel from Government Probe
• Sanjay Kumar "Betrayed the Trust of the Board," Says CA's Attorney
• "Not Guilty," Both Kumar and Richards Tell Judge