|By Maureen O'Gara||
|September 25, 2004 12:00 AM EDT||
Ex-Computer Associates CEO Sanjay Kumar could be sentenced to 100 years in the slammer if he's found guilty of everything he was charged with on Wednesday, according to the Justice Department. Not exactly a Martha Stewart reprise.
Ditto the former head of the company's worldwide sales Stephen Richards.
CA's former general counsel Stephen Woghin, who turned state's evidence and has reportedly been drawing the noose tighter and tighter around the necks of Kumar and Richards, pleaded guilty to charges of conspiracy to commit securities fraud and obstruction of justice in federal court in Brooklyn Wednesday morning. He could get 25 years.
CA, on the other hand, which turned a blind eye to the company's so-called 35-day month shenanigans until recently, got off easy. It cut a sweetheart deal with the government and escaped being branded a criminal. Instead of being hauled into court, it has agreed, as expected, to a rarely used form of probation called deferred prosecution that will last about 18 months.
During that time CA has to toe the straight and narrow and prove to a court-appointed examiner that it has truly seen the light and reformed otherwise the government could dust off its case and drag it into court for fraud and obstruction.
The company has also agreed to help the government's prosecution of Kumar and Richards, set up a $225 million stockholder restitution fund and get ex-employees who benefited from the company's vast $3.3 billion fraud to disgorge their ill-gotten gains.
Despite the fact that CA was late in getting religion and is only now accepting responsibility for its illegal conduct, the Justice Department is giving it points for its recent corporate reforms and the fact that it finally threw out the culprits accused of raping the joint.
It also got points for settling shareholder suits last year to the tune of roughly $163 million in stock and cash - which effectively pushes its restitution to $388 million.
The government, which has been gunning for Kumar and Richards, particularly Kumar, unsealed a grand jury indictment against them Wednesday charging them with 10 counts of conspiracy to commit securities and wire fraud, securities fraud, obstruction of justice and conspiracy to obstruct justice.
Richards was also charged with perjury and Kumar with lying to law enforcement officials though not under oath.
The charges stem from CA's 35-day months, CA's internal name for the systematic, company-wide practice of backdating contracts to inflate its results, and then covering it up. In the fiscal years 2000 and 2001 alone, the government said, $2.2 billion of revenue was booked prematurely. Another $1.1 billion was prematurely booked before that.
The indictment says Kumar personally and "routinely" kept CA's books open past the end of the quarter and that he and Richards directed CA sales managers and salespeople to backdate license agreements.
Sanjay himself negotiated and signed some of those last-minute deals, the government said, in one case flying to Paris on the company jet to bring in a belated $32 million contract, later bragging that his "Paris caper saved the quarter." The quarter had closed eight days before.
Revenues from those agreements were then improperly recognized in the quarter just ended, propping up CA's stock price. Afterwards the paperwork was "cleaned up" for the benefit of CA's outside auditors. When the practice finally ended and CA missed its numbers, the stock dropped 43%.
The indictment says that Kumar, Richards and Woghin lied to CA's own outside lawyers about the 35-day months, knowing that the firm would carry their tall tales back to the US Attorney's Office, the SEC and the FBI, which had started investigating the company in early 2002.
The government says Kumar instructed Woghin to coach CA employees on how to answer questions about the 35-day months before the government or CA's attorneys interviewed them. It also says Kumar did some of the coaching himself.
Until Woghin's testimony and that of ex-CA CFO Ira Zar, who pleaded guilty to securities fraud and obstruction of justice in April, delivered Kumar squarely into the government's hands, the Justice Department was reportedly going to indict a bunch of more than a dozen lesser fish. The DOJ tore up that plan in the last few weeks, sources said, as its case against Kumar grew more detailed.
CA's former senior VP of finance and administration David Kaplan, former VP of finance David Rivard and former divisional senior VP in charge of the company's Global Sales Organization Lloyd Silverstein have also turned state's evidence and plead guilty to securities fraud, obstruction of justice and conspiracy charges.
Zar, Kaplan, Rivard and Silverstein await sentencing, an appointment with destiny that has been repeatedly postponed. Rivard and Kaplan face 10 years each, Zar 20, but they will probably draw a lesser sentence for copping a plea.
In a partial settlement with the SEC, Woghin, who's supposed to be sentenced December 10, can never be an officer or director of a public company again and will be fined.
Folks close to Sanjay, who was arraigned Thursday and didn't answer his cell phone, say he's determined to fight the charges against him to the bitter end.
He's also given little chance of wiggling free. The government says he admitted to the existence of the "three-day window" and to encouraging salespeople to finalize deals after the end of the quarter, but ascribed it to innocent motives.
He also denied meeting with his staff at the end of the quarter to discuss whether CA had met its revenue forecast.
Unfortunately for him there's an e-mail trail indicating he was aware of bookings with fake dates. One e-mail discusses a company that couldn't backdate a contract to March 31 because it wasn't legally formed until April 1. It was told to leave the date blank.
Supposedly he's going to claim such things are forgeries and that the government coerced the witnesses against him. His trial is set for next July and is reportedly supposed to run six-10 weeks. Given an appeal, it's unlikely he'll know his fate until 2007-2008, sources said.
Meanwhile, the deal CA cut with the government demands that it tighten up even more than it has on corporate governance. It's supposed to add two more independent directors to its board, ensuring that two-thirds of the board, which was lax beyond belief, are outsiders.
It's also supposed to establish both a compliance committee and a disclosure committee, hire a compliance officer, reorganize both its finance and internal audit departments, install a worldwide ERP system to tighter its controls and start teaching its staff ethics.
The deal, signed by CA chairman Lewis Ranieri, gives CA 18 months to set aside the $225 million it's been ordered to put in the restitution fund. It's got to write a check for $75 million in 30 days, another one for $75 million in a year and the last one for $75 million a year-and-a-half from now. It will write the money off.
It has to appoint a government-approved administrator to dole out the money to past and present shareholders injured by the fraud. The company has to figure out a way to identify these people and come up with a formula to recompense them.
The prospective compliance officer is supposed to get full access to the company's audit department and the compliance side of its legal and finance departments.
The examiner, on the other hand, is supposed to vet CA's revenue recognition procedures, its internal accounting controls, its ERP system, its audit department, its ethics and compliance policies and its records management. The minder is supposed to stay in place until the company puts in two successive quarters with all the required reforms substantially implemented. The government anticipates this could take more than 18 months.
The new disclosure committee, made up of CA's CEO, COO, CFO, chief compliance officer and the general counsel, is supposed to vet SEC filings and significant press releases. It's also supposed to set up a telephone hotline for whistleblowers and advertise the fact.
If CA gets bought before its 18-month probation is up, the buyer will be bound by the pact.
The Wall Street Journal, which called the breadth of the indictment "surprising," described deferred prosecution, also called "pretrial diversion," as being pretty unusual in corporation prosecutions. It's usually reserved for first-time offenders accused of minor crimes. It was, however, used in a stock fraud case against Prudential Securities in 1994, in an accounting fraud case against PNC Financial Services Group last year and in a money laundering case against Banco Popular de Puerto Rico also last year.
Deputy Attorney General James Comey acknowledged that deferred prosecution was unusual and said that the government had to decide whether the company was redeemable or whether like Arthur Andersen it had to be "put down."
Prudential remarks that the outcome was better than anticipated "since CA's fine will be paid to shareholders" rather than the government.
SYS-CON Events announced today that SOA Software, an API management leader, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. SOA Software is a leading provider of API Management and SOA Governance products that equip business to deliver APIs and SOA together to drive their company to meet its business strategy quickly and effectively. SOA Software’s technology helps businesses to accelerate their digital channels with APIs, drive partner adoption, monetize their assets, and achieve a...
Oct. 31, 2014 07:15 PM EDT Reads: 2,125
SYS-CON Events announced today that Aria Systems, the recurring revenue expert, has been named "Bronze Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Aria Systems helps leading businesses connect their customers with the products and services they love. Industry leaders like Pitney Bowes, Experian, AAA NCNU, VMware, HootSuite and many others choose Aria to power their recurring revenue business and deliver exceptional experiences to their customers.
Oct. 31, 2014 06:30 PM EDT Reads: 2,201
SYS-CON Events announced today that AgilePoint, the leading provider of Microsoft-centric Business Process Management software, will exhibit at SYS-CON's 2nd International @ThingsExpo which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. AgilePoint is the leading provider of Microsoft-based Business Process Management (BPM) software products, has 1,300+ on-premise and cloud deployments in 25+ countries and provides the same advanced BPM feature set as J2EE vendors like IBM and Appian for the Microsoft .NET native environment. AgilePoint customer...
Oct. 31, 2014 05:00 PM EDT Reads: 1,359
The Internet of Things (IoT) promises to evolve the way the world does business; however, understanding how to apply it to your company can be a mystery. Most people struggle with understanding the potential business uses or tend to get caught up in the technology, resulting in solutions that fail to meet even minimum business goals. In his session at Internet of @ThingsExpo, Jesse Shiah, CEO / President / Co-Founder of AgilePoint Inc., will show what is needed to leverage the IoT to transform your business. He will discuss opportunities and challenges ahead for the IoT from a market and tec...
Oct. 31, 2014 04:00 PM EDT Reads: 1,653
SYS-CON Events announced today that Utimaco will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Utimaco is a leading manufacturer of hardware based security solutions that provide the root of trust to keep cryptographic keys safe, secure critical digital infrastructures and protect high value data assets. Only Utimaco delivers a general-purpose hardware security module (HSM) as a customizable platform to easily integrate into existing software solutions, embed business logic and build s...
Oct. 31, 2014 03:00 PM EDT Reads: 1,982
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, will describe an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-device experiences grounded in people’s real needs and desires.
Oct. 31, 2014 02:00 PM EDT Reads: 1,850
SYS-CON Events announced today that TeleStax, the main sponsor of Mobicents, will exhibit at Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. TeleStax provides Open Source Communications software and services that facilitate the shift from legacy SS7 based IN networks to IP based LTE and IMS networks hosted on private (on-premise), hybrid or public clouds. TeleStax products include Restcomm, JSLEE, SMSC Gateway, USSD Gateway, SS7 Resource Adaptors, SIP Servlets, Rich Multimedia Services, Presence Services/RCS, Diame...
Oct. 31, 2014 09:00 AM EDT Reads: 1,723
Samsung VP Jacopo Lenzi, who headed the company's recent SmartThings acquisition under the auspices of Samsung's Open Innovaction Center (OIC), answered a few questions we had about the deal. This interview was in conjunction with our interview with SmartThings CEO Alex Hawkinson. IoT Journal: SmartThings was developed in an open, standards-agnostic platform, and will now be part of Samsung's Open Innovation Center. Can you elaborate on your commitment to keep the platform open? Jacopo Lenzi: Samsung recognizes that true, accelerated innovation cannot be driven from one source, but requires a...
Oct. 31, 2014 09:00 AM EDT Reads: 3,403
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at Internet of @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, will discuss how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money! Speaker Bio: Esmeralda Swartz, CMO of MetraTech, has spent 16 years as a marketing, product management, and busin...
Oct. 31, 2014 09:00 AM EDT Reads: 2,355
Things are being built upon cloud foundations to transform organizations. This CEO Power Panel at 15th Cloud Expo, moderated by Roger Strukhoff, Cloud Expo and @ThingsExpo conference chair, will address the big issues involving these technologies and, more important, the results they will achieve. How important are public, private, and hybrid cloud to the enterprise? How does one define Big Data? And how is the IoT tying all this together?
Oct. 31, 2014 08:45 AM EDT Reads: 2,026
We certainly live in interesting technological times. And no more interesting than the current competing IoT standards for connectivity. Various standards bodies, approaches, and ecosystems are vying for mindshare and positioning for a competitive edge. It is clear that when the dust settles, we will have new protocols, evolved protocols, that will change the way we interact with devices and infrastructure. We will also have evolved web protocols, like HTTP/2, that will be changing the very core of our infrastructures. At the same time, we have old approaches made new again like micro-services...
Oct. 31, 2014 07:00 AM EDT Reads: 1,701
SYS-CON Events announces a new pavilion on the Cloud Expo floor where WebRTC converges with the Internet of Things. Pavilion will showcase WebRTC and the Internet of Things. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices--computers, smartphones, tablets, and sensors – connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades.
Oct. 30, 2014 05:30 PM EDT Reads: 2,231
The only place to be June 9-11 is Cloud Expo & @ThingsExpo 2015 East at the Javits Center in New York City. Join us there as delegates from all over the world come to listen to and engage with speakers & sponsors from the leading Cloud Computing, IoT & Big Data companies. Cloud Expo & @ThingsExpo are the leading events covering the booming market of Cloud Computing, IoT & Big Data for the enterprise. Speakers from all over the world will be hand-picked for their ability to explore the economic strategies that utility/cloud computing provides. Whether public, private, or in a hybrid form, clo...
Oct. 30, 2014 05:30 PM EDT Reads: 1,544
SYS-CON Events announced today that Gridstore™, the leader in software-defined storage (SDS) purpose-built for Windows Servers and Hyper-V, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Gridstore™ is the leader in software-defined storage purpose built for virtualization that is designed to accelerate applications in virtualized environments. Using its patented Server-Side Virtual Controller™ Technology (SVCT) to eliminate the I/O blender effect and accelerate applications Gridsto...
Oct. 30, 2014 02:00 PM EDT Reads: 2,635
SYS-CON Events announced today that Red Hat, the world's leading provider of open source solutions, will exhibit at Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, a...
Oct. 30, 2014 12:15 PM EDT Reads: 2,095
As the Internet of Things unfolds, mobile and wearable devices are blurring the line between physical and digital, integrating ever more closely with our interests, our routines, our daily lives. Contextual computing and smart, sensor-equipped spaces bring the potential to walk through a world that recognizes us and responds accordingly. We become continuous transmitters and receivers of data. In his session at Internet of @ThingsExpo, Andrew Bolwell, Director of Innovation for HP’s Printing and Personal Systems Group, will discuss how key attributes of mobile technology – touch input, senso...
Oct. 30, 2014 12:00 PM EDT Reads: 1,792
The Internet of Things (IoT) is making everything it touches smarter – smart devices, smart cars and smart cities. And lucky us, we’re just beginning to reap the benefits as we work toward a networked society. However, this technology-driven innovation is impacting more than just individuals. The IoT has an environmental impact as well, which brings us to the theme of this month’s #IoTuesday Twitter chat. The ability to remove inefficiencies through connected objects is driving change throughout every sector, including waste management. BigBelly Solar, located just outside of Boston, is trans...
Oct. 30, 2014 11:00 AM EDT Reads: 2,208
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, will examine three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective storage designed to handle the massive surge in back-end data in a world where timely analytics...
Oct. 30, 2014 08:00 AM EDT Reads: 1,672
Internet of @ThingsExpo Silicon Valley announced on Thursday its first 12 all-star speakers and sessions for its upcoming event, which will take place November 4-6, 2014, at the Santa Clara Convention Center in California. @ThingsExpo, the first and largest IoT event in the world, debuted at the Javits Center in New York City in June 10-12, 2014 with over 6,000 delegates attending the conference. Among the first 12 announced world class speakers, IBM will present two highly popular IoT sessions, which will take place November 4-6, 2014 at the Santa Clara Convention Center in Santa Clara, Calif...
Oct. 30, 2014 07:30 AM EDT Reads: 2,322
From a software development perspective IoT is about programming "things," about connecting them with each other or integrating them with existing applications. In his session at @ThingsExpo, Yakov Fain, co-founder of Farata Systems and SuranceBay, will show you how small IoT-enabled devices from multiple manufacturers can be integrated into the workflow of an enterprise application. This is a practical demo of building a framework and components in HTML/Java/Mobile technologies to serve as a platform that can integrate new devices as they become available on the market.
Oct. 29, 2014 02:15 PM EDT Reads: 2,092