Computer Associates chairman and CEO
Sanjay Kumar fell this morning to the spiraling accounting scandal
engulfing the company after the board met yesterday to consider what
to do about him. Kumar has also stepped down from the board.
CA has not made a clean break with Kumar and declined to explain
why. He has been named Bill Gates-like to a new post as chief
software architect, suggesting that maybe he's merely being shelved
in case he survives the government's investigation of the CA's
cooked books unscathed.
CA could not explain what a chief software architect really does or
what would recommend Kumar for the job.
The company says it will appoint an interim CEO and start searching
immediately for a new one both internally and externally.
Of course, it would be impossible to hire a new CEO if the old one
is waiting in the wings ready to make a comeback as soon as the sky
clears so maybe the new job is just a way to ease Kumar out without
making it look like it's for cause.
One would think the heir presumptive is CA's new CFO Jeff Clarke,
who, as Compaq's CFO, successfully handled Compaq's integration with
HP from the Compaq side. He's completely unassociated with the
regime responsible for the scandal.
Independent CA director Lewis Ranieri, the founder of Hyperion
Partners LP, has stepped in as chairman.
On Monday morning after the New York Times ignited speculation that
the CA board was about to kick Kumar out, the company fired nine
people who it refused to identify who it said were caught in the
dragnet launched last year by the board's audit committee to look
into the company's shoddy accounting practices.
CA also said Monday that it had answered the Well Notice it got from
the SEC in mid-January saying it might be taken to court for its
sins. It's unclear whether the company met the deadline for a
response.
The audit committee's investigation has so far cost five senior CA
executives including its CFO and general counsel their jobs and
reputations, maybe even their freedom.
In a statement released this morning CA said it was reviewing its
actions with the Justice Department and SEC suggesting that it might
be offering them Kumar's head as well as the others' to avoid a
court trial.
Those terminated Monday were described only as four people from CA's
legal department and five people from its finance department.
Eight of the people worked at company headquarters in Islandia, Long
Island; one was based in Atlanta. And rumor has it that two other
people resigned.
CA refused to explain why it had taken so long to implicate these
nine underlings unless the idea was to sacrifice them to distract
attention from Kumar, who is widely believed to have been a party to
the fraud, if not an instigator.
Neither the government nor the audit committee has charged Kumar
with anything, but testimony given by ex-CFO Ira Zar, who reported
to Kumar, is believed to have implicated him as the shadowy
"Executive A" Zar is supposed to have conferred with about revenue
recognition.
Anyhow, CA has a reputation for being an autocracy, where acting on
one's own initiative would be unthinkable, making Kumar's
protestations of innocence suspect.
The twin government probes are now believed to be targeting him and
other senior managers as well as retired company founder Charles
Wang.
If, as he claims, Kumar honestly didn't know that his subordinates
were cooking the books, then he's an overpaid incompetent. Either
way, fool or scoundrel, his position was untenable and most of Wall
Street thought he was doomed or should be.
In explaining its actions, CA's board said in a canned statement
this morning that "The changes in Sanjay's role are not based on the
conclusion that he engaged in any wrongdoing. Nonetheless, the
conduct in question occurred during his tenure and the board felt
this action was appropriate."
The company said Monday that the audit committee was nearing the end
of its probe. The committee is supposed to say whether, in its
opinion, CA should restate financial periods beyond fiscal 2000,
when the committee has already admitted the company illegally
recognized some $1.6 billion in revenues.
In a statement the company released Monday Kumar said CA is drawing
on staff from other areas and from its international subsidiaries to
pick up the slack created by the terminations.
There is further speculation that authorities could light out after
directors who served on CA's board when the manipulation shenanigans
were going on.
They would include Dick Grasso, former head of the New York Stock
Exchange, who's already in hot water with New York's reform-minded
Attorney General Eliot Spitzer for excessive pay.
CA expects to releases its four-quarter results on May 12.
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