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Kumar Finally Abandons CA - Indictment Expected

Kumar Finally Abandons CA - Indictment Expected

Sanjay Kumar, the 42-year-old Sri Lankan immigrant who lived the American dream and became CEO of Computer Associates, the third-largest American software company, finally severed his connection with the firm on Friday after an ill-conceived, if short-lived, attempt to cling to the company as chief software architect rather than as CEO failed.

Sources say Kumar finally pulled the ripcord because the government is preparing to indict him in the next week or two, capping the twin investigations into CA's books that the SEC and the Justice Department have been conducting for over two years.

The parallel investigations uncovered billions in prematurely booked revenues that inflated CA's stock price.

The government is reportedly finally ready to move against Kumar now that it has dealt with Long Island-based Symbol Technologies Inc.

The same federal offices have been handling both the Symbol and CA cases and their plate has been kind of full, but last week 11 of Symbol's former executives were charged with fraud, and criminal indictments were handed down against eight former Symbol officials including its president and chief executive officer.

Despite the reports of Kumar's imminent indictment, CA Friday stonewalled and refused to discuss the issue, or anything else for that matter beyond its canned statement. The government is also mum.

The official statement CA issued Friday had Kumar explain his departure by saying, "It has become increasingly clear to me in the past few days that my continued role at CA is not helping the company's efforts to move forward. I understood that my stepping down as chairman and CEO represented a break with the past, but I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue."

Kumar said in the statement that he hoped his departure "will permit CA to move forward" and from a canned quote added to the press release by CA's recently installed new chairman Lewis Ranieri, one of its board of directors, it's transparent that Kumar's departure is meant to appease the government prosecutors, who have publicly branded CA a "corrupt culture " and have wanted Kumar out for months.

The CA board, Ranieri said, "is committed to reaching a settlement of the government's investigation into the company's past accounting practices as quickly as possible. We are working hard to take the remedial steps necessary to put this entire matter behind CA. Sanjay's decision to leave CA was made in that spirit."

CA, of course, is trying to avoid getting hauled into court itself as the government has threatened.

Sources claim that Kumar blew any chance to cop a plea by not throwing himself on the tender mercies of the government prosecutors a year ago. Subsequently, CA and Kumar's reactions have been a series of too-little-too-late concessions reportedly driving the chief prosecutor to remark a few days ago that she was "done with them f@*king with me."

Kumar stepped down as chairman and CEO of CA six weeks ago, but was believed to be still running the company through a puppet regime consisting of Ranieri, interim CEO Ken Kron, another CA board member, and HP émigré Jeff Clarke, who was brought in recently to replace CA's ousted CFO Ira Zar, the first CA executive to fall to the government probe last October.

Clarke was made COO as well as CFO when Kumar styled himself chief software architect.

The government reportedly saw through Kumar's governance ploy, and its desire to hang Kumar's scalp from its lodge pole, already finely honed by the fact that CA's internal audit committee's investigation of the fraud absolved Kumar of any wrong-doing or responsibility, sources say, was further exercised when Kumar was lauded at CA World and in the press days after he gave up his CEO title.

Heck, the government was ticked that Kumar even showed up at the user conference and its mood didn't improve when CA subsequently let it out that it had offered to buy the government off with a measly $10 million fine to keep the company out of court.

Apparently CA was supposed to keep that offer, which it described as an "initial" one, to itself and didn't have to take a reserve to cover it like it did. Taking the reserve in the financial statement CA filed with the SEC covering its fiscal fourth quarter a few days ago made the offer grist for the press mill.

The government, however, reportedly thought it was exactly the wrong message to send to the market. Presumably one of the reasons the government felt it was inappropriate was the fact that CA was offering to pay for the sins of its officials with stockholder money. In addition, the size of the offer in no way mirrors the size of CA's fraud and it did not accomplish the government's goal of ousting Kumar.

Kumar's ultimate departure - despite the fact that he'll be using up vacation time until the end of the month, according to Newsday - makes him something of a Robespierre figure.

Since last October, CA has thrown most of its senior managers, one by one, to the government probe, hoping to placate the righteous blood lust of the federal prosecutors and save Kumar.

In the long run, the stratagem failed to protect Kumar and not only prolonged CA agonies, but also backfired in Kumar's face.

So far four former CA executives, including its ex-CFO and three other financial guys, have pleaded guilty to charges of securities fraud and obstructing justice. The testimony they gave to the court implicated a high-ranking grey eminence publicly identified so far only as "Executive A" widely identified as Kumar.

Meanwhile, CA's battered executive ranks have retracted again. The company's senior VP of corporate communications Charlie Holleran has reportedly bailed out to go to Ford.

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
bentover 06/10/04 10:43:44 AM EDT

This is the perspective of an ex-CA employee. This company stinks from the top to the bottom. Questionable practices abound. Marginal employees are commended while those who threaten others professionally are ousted. Old-timers advise new blood to shut up and put up with questionable activities. CA should be indicated as a corporation. Let the carnival begin.

Nivlem 06/08/04 09:41:16 AM EDT

I remember S. Kumar form the mid 80s in SC. He was a scheming person then. Finally, the evils of his ways has caught up with him. Time to pay the piper.

Tim 06/08/04 06:51:24 AM EDT

Could it be true Kumar miss that the stock values were inflated? We haven’t been able to get a true financial picture of our operation since we instituted Computer Associates (CA) LMP programs. Why should we believe their financial records are better than ours?

Anthony Friday 06/08/04 02:15:19 AM EDT

I am surprised at the level of vehemence in some of the feedback to this forum. To all of CA's detractors who "hope they go bust" - perhaps they should consider the millions of dollars poured into community relations programmes around the world, consider the sponsorship of the Smile Train, consider the KaBoom playgrounds, and consider the robust software driving many of the Fortune 1000 companies. CA is more than a set of accounting practices. It is a thriving company with a solid and ethical "employee" culture that strongly focuses on delivering real value for both its clients and the community in which it operates. In case you haven't already guessed - I am a CA employee - and proud of it.
Anthony Friday (CA-Australia)

Ray Mossom 06/08/04 12:16:45 AM EDT

As an ex employee of the Legent Corporation who CA bought in 1995. All I can say is that I am pleased to see CA finally get their just desserts. Good riddance to them is all I can say I hope they go bust.

Just Desserts 06/07/04 10:30:36 PM EDT

The shenanigans of CA and its executives finally caught up with them. It's been 13 years since I met Sanjay Kumar and I've waited patiently and hopefully to see him get what he deserved. I, for one, will be in the courtroom for his sentencing and expect to be tossed out because of my cheering.

TheTruth 06/07/04 08:16:39 PM EDT

All of these clowns that game the market should be forced into bankruptcy and locked away for a long, long time. People are trying to build retirements by investing in these companies run by deceit and inflated earnings They're much worse than common criminals. Take them down.

David 06/07/04 01:35:25 PM EDT

Shouldn't it be "CA Finally Abandons Kumar"?

CAproblems 06/07/04 11:16:23 AM EDT

So now we know he meant it when last week he wrote, in his last official e-mail to CA's 15,000 employees:

"I was getting in the way of progress."

FallFromGrace 06/07/04 11:03:46 AM EDT

yet just a few days ago he still had his feet firmly under the desk:

Kumar, whom the board in April awarded three-year stock grants valued at $8 million and a half-million options, does not appear to have significantly altered his daily routine since stepping down last month. He still jets around the world to visit with clients, plays ambassador to the new executive team with its biggest international clients and partners, and remains a regular fixture at CA, occupying in his old office. In an interview Sunday he spoke of the "moral obligation" he felt toward CA, which he called "part of my DNA...It's 17 years of what's in my head."

Kumar said while he's no longer involved in the company's financial affairs, his other responsibilities keep him as busy as ever. "If I wasn't so busy I'd probably miss a lot of things," he said.

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