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Kumar Dumped as CA CEO & Chairman

Kumar Dumped as CA CEO & Chairman

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.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments
TheStreet.com 04/21/04 12:46:35 PM EDT

says: Investors, evidently glad the company was taking action before the government, bid CA's stock up 84 cents, or 3.4%, to $26.41 at midday.

Financial Times 04/21/04 12:45:12 PM EDT

says:

In a statement, Louis Ranieri, who took over as chairman on Wednesday, said that the decision to strip Mr Kumar of his responsibilities was "not based on the conclusion that he engaged in any wrongdoing." He added, thought, that "the conduct in question occurred during his tenure, and the board felt this action was appropriate."