|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.
|Ingalill Richardsson 12/27/04 11:40:57 AM EST|
I think the old board has something to dig up.I do not think that Sanjay Kumar need to betrade, and bee an betrader. he is a men of onnor.I hoop the god can protect him aginst the cruel buissnis in the U.S.A.He has no reccord of such life in the past.He has two children and a loved wife. He would not do suc things and risk their happines. He has been an American and he has been praud of his new land. He is a father and husband for the first.I am happy that it will take time to the next triel. I am subjektiv,I know,but i belive Sanjay is not gilty. Please corect my spelling, I am better in my mind.I know Sanjay sinc he was a young student,he is a men of onnor i belive .
|itiswhatitis_2001 09/25/04 11:43:59 AM EDT|
The Board is complicit in all this. Why are they paying Kumar's legal fees? Their Sargent Schultz defense for not knowing of the 35-day month "I know nothing, I see nothing" isn't going to protect them forecver. There are big Republican interests protecting Wang and CA right now, just like Enron.
|From a CA Employee 09/25/04 11:07:27 AM EDT|
I hope Sanjay loses everything and spends a lomg time in jail.
He was involved in a lengthy cover-up that damaged our business, the shareholders and the employees. If he had come clean years ago, we might have been able to recover and we might have been able to avoid some of the layoffs that came down. In my mind, some innocent people and their families were hurt, to protect Sanjay.
Every time a new revelation about the cover-up was reported in the news, orders would come down from Islandia, and everyone would be gathered into conference rooms and on conference calls, and be instructed how to spin the news. We were all basically enlisted to cover-up for Sanjay. This was done to "protect the business", but in reality it was done to protect Sanjay.
Sanjay's blather about "Core Values" and "Corporate Governance" were transparent attempts to make him seem ethical. The Core Values, in particular, were quite obnoxious. He was really overplaying his hand. Every email from hom, every internal conference call, he would robotically talk about Core Values. I remember thinking, "Methinks he doth protest too much". The main person who needed to change his behavior to reflect some ethical standards was Sanjay himself.
Sanjay's crimes of revenue recognition were abusive, but frankly not uncommon in the software business during the years that it occurred. His cover-up, and his easy willingness to put himself ahead of the company, the shareholders, and the employees whose livelihoods and credibility he would so readily sacrifice, were worse. He gets no sympathy from me.
In my mind, Charles W needs to go to jail as well. And while we're at it, the fact that Russ Artzt is not only un-indicted, but still employed, and still on the Board of Directors, is outrageous.
I hope Sanjay pays dearly for what he did, and I hope Charles and Russ are not far behind.
|rocket2002 09/25/04 09:05:47 AM EDT|
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."
It should be put down. Like a sick horse. For Kumar, it is time for jail. Lights out at 9:00 PM and don't sleep on your stomach.
SYS-CON Media announced today that @WebRTCSummit Blog, the largest WebRTC resource in the world, has been launched. @WebRTCSummit Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. @WebRTCSummit Blog can be bookmarked ▸ Here @WebRTCSummit conference site can be bookmarked ▸ Here
Apr. 25, 2015 02:00 PM EDT Reads: 2,480
Dave will share his insights on how Internet of Things for Enterprises are transforming and making more productive and efficient operations and maintenance (O&M) procedures in the cleantech industry and beyond. Speaker Bio: Dave Landa is chief operating officer of Cybozu Corp (kintone US). Based in the San Francisco Bay Area, Dave has been on the forefront of the Cloud revolution driving strategic business development on the executive teams of multiple leading Software as a Services (SaaS) application providers dating back to 2004. Cybozu's kintone.com is a leading global BYOA (Build Your O...
Apr. 25, 2015 02:00 PM EDT Reads: 1,521
While not quite mainstream yet, WebRTC is starting to gain ground with Carriers, Enterprises and Independent Software Vendors (ISV’s) alike. WebRTC makes it easy for developers to add audio and video communications into their applications by using Web browsers as their platform. But like any market, every customer engagement has unique requirements, as well as constraints. And of course, one size does not fit all. In her session at WebRTC Summit, Dr. Natasha Tamaskar, Vice President, Head of Cloud and Mobile Strategy at GENBAND, will explore what is needed to take a real time communications ...
Apr. 25, 2015 02:00 PM EDT Reads: 1,761
SYS-CON Events announced today that GENBAND, a leading developer of real time communications software solutions, has been named “Silver Sponsor” of SYS-CON's WebRTC Summit, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. The GENBAND team will be on hand to demonstrate their newest product, Kandy. Kandy is a communications Platform-as-a-Service (PaaS) that enables companies to seamlessly integrate more human communications into their Web and mobile applications - creating more engaging experiences for their customers and boosting collaboration and productiv...
Apr. 25, 2015 01:00 PM EDT Reads: 2,704
SYS-CON Events announced today that BroadSoft, the leading global provider of Unified Communications and Collaboration (UCC) services to operators worldwide, has been named “Gold Sponsor” of SYS-CON's WebRTC Summit, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. BroadSoft is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communications over their Internet Protocol networks. The Company’s core communications platform enables the delivery of a range of enterprise and consumer calling...
Apr. 25, 2015 12:30 PM EDT Reads: 2,508
So I guess we’ve officially entered a new era of lean and mean. I say this with the announcement of Ubuntu Snappy Core, “designed for lightweight cloud container hosts running Docker and for smart devices,” according to Canonical. “Snappy Ubuntu Core is the smallest Ubuntu available, designed for security and efficiency in devices or on the cloud.” This first version of Snappy Ubuntu Core features secure app containment and Docker 1.6 (1.5 in main release), is available on public clouds, and for ARM and x86 devices on several IoT boards. It’s a Trend! This announcement comes just as...
Apr. 25, 2015 12:00 PM EDT Reads: 1,373
What exactly is a cognitive application? In her session at 16th Cloud Expo, Ashley Hathaway, Product Manager at IBM Watson, will look at the services being offered by the IBM Watson Developer Cloud and what that means for developers and Big Data. She'll explore how IBM Watson and its partnerships will continue to grow and help define what it means to be a cognitive service, as well as take a look at the offerings on Bluemix. She will also check out how Watson and the Alchemy API team up to offer disruptive APIs to developers.
Apr. 25, 2015 12:00 PM EDT Reads: 1,818
The IoT Bootcamp is coming to Cloud Expo | @ThingsExpo on June 9-10 at the Javits Center in New York. Instructor. Registration is now available at http://iotbootcamp.sys-con.com/ Instructor Janakiram MSV previously taught the famously successful Multi-Cloud Bootcamp at Cloud Expo | @ThingsExpo in November in Santa Clara. Now he is expanding the focus to Janakiram is the founder and CTO of Get Cloud Ready Consulting, a niche Cloud Migration and Cloud Operations firm that recently got acquired by Aditi Technologies. He is a Microsoft Regional Director for Hyderabad, India, and one of the f...
Apr. 25, 2015 12:00 PM EDT Reads: 1,639
The 17th International Cloud Expo has announced that its Call for Papers is open. 17th International Cloud Expo, to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, APM, APIs, Microservices, Security, Big Data, Internet of Things, DevOps and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal today!
Apr. 25, 2015 12:00 PM EDT Reads: 2,294
SYS-CON Media announced today that @ThingsExpo Blog launched with 7,788 original stories. @ThingsExpo Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. @ThingsExpo Blog can be bookmarked. 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.
Apr. 25, 2015 11:00 AM EDT Reads: 2,514
The world's leading Cloud event, Cloud Expo has launched Microservices Journal on the SYS-CON.com portal, featuring over 19,000 original articles, news stories, features, and blog entries. DevOps Journal is focused on this critical enterprise IT topic in the world of cloud computing. Microservices Journal offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. Follow new article posts on Twitter at @MicroservicesE
Apr. 25, 2015 11:00 AM EDT Reads: 2,075
SYS-CON Events announced today that robomq.io will exhibit at SYS-CON's @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. robomq.io is an interoperable and composable platform that connects any device to any application. It helps systems integrators and the solution providers build new and innovative products and service for industries requiring monitoring or intelligence from devices and sensors.
Apr. 25, 2015 11:00 AM EDT Reads: 2,080
Wearable technology was dominant at this year’s International Consumer Electronics Show (CES) , and MWC was no exception to this trend. New versions of favorites, such as the Samsung Gear (three new products were released: the Gear 2, the Gear 2 Neo and the Gear Fit), shared the limelight with new wearables like Pebble Time Steel (the new premium version of the company’s previously released smartwatch) and the LG Watch Urbane. The most dramatic difference at MWC was an emphasis on presenting wearables as fashion accessories and moving away from the original clunky technology associated with t...
Apr. 25, 2015 11:00 AM EDT Reads: 2,071
SYS-CON Events announced today that Litmus Automation will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Litmus Automation’s vision is to provide a solution for companies that are in a rush to embrace the disruptive Internet of Things technology and leverage it for real business challenges. Litmus Automation simplifies the complexity of connected devices applications with Loop, a secure and scalable cloud platform.
Apr. 25, 2015 11:00 AM EDT Reads: 1,727
In 2015, 4.9 billion connected "things" will be in use. By 2020, Gartner forecasts this amount to be 25 billion, a 410 percent increase in just five years. How will businesses handle this rapid growth of data? Hadoop will continue to improve its technology to meet business demands, by enabling businesses to access/analyze data in real time, when and where they need it. Cloudera's Chief Technologist, Eli Collins, will discuss how Big Data is keeping up with today's data demands and how in the future, data and analytics will be pervasive, embedded into every workflow, application and infra...
Apr. 25, 2015 11:00 AM EDT Reads: 1,433
As Marc Andreessen says software is eating the world. Everything is rapidly moving toward being software-defined – from our phones and cars through our washing machines to the datacenter. However, there are larger challenges when implementing software defined on a larger scale - when building software defined infrastructure. In his session at 16th Cloud Expo, Boyan Ivanov, CEO of StorPool, will provide some practical insights on what, how and why when implementing "software-defined" in the datacenter.
Apr. 25, 2015 11:00 AM EDT Reads: 1,607
SYS-CON Events announced today that Vicom Computer Services, Inc., a provider of technology and service solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. They are located at booth #427. Vicom Computer Services, Inc. is a progressive leader in the technology industry for over 30 years. Headquartered in the NY Metropolitan area. Vicom provides products and services based on today’s requirements around Unified Networks, Cloud Computing strategies, Virtualization around Software defined Data Ce...
Apr. 25, 2015 10:30 AM EDT Reads: 1,727
SYS-CON Events announced today the IoT Bootcamp – Jumpstart Your IoT Strategy, being held June 9–10, 2015, in conjunction with 16th Cloud Expo and Internet of @ThingsExpo at the Javits Center in New York City. This is your chance to jumpstart your IoT strategy. Combined with real-world scenarios and use cases, the IoT Bootcamp is not just based on presentations but includes hands-on demos and walkthroughs. We will introduce you to a variety of Do-It-Yourself IoT platforms including Arduino, Raspberry Pi, BeagleBone, Spark and Intel Edison. You will also get an overview of cloud technologies s...
Apr. 25, 2015 10:15 AM EDT Reads: 2,991
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? Join this panel of experts as they peel away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud environment, and we must architect and code accordingly. At the very least, you’ll have no problem filling in your buzzword bingo cards.
Apr. 25, 2015 10:00 AM EDT Reads: 2,201
SYS-CON Events announced today that AIC, a leading provider of OEM/ODM server and storage solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. AIC is a leading provider of both standard OTS, off-the-shelf, and OEM/ODM server and storage solutions. With expert in-house design capabilities, validation, manufacturing and production, AIC's broad selection of products are highly flexible and are configurable to any form factor or custom configuration. AIC leads the industry with nearly 20 years of ...
Apr. 25, 2015 10:00 AM EDT Reads: 5,003