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Update: Kumar pleads guilty in CA fraud case

He was part of 'a culture of corruption and fraud,' says the U.S. Attorney in the case

April 24, 2006 12:00 PM ET

Computerworld - Sanjay Kumar, the former CEO of Computer Associates International Inc., pleaded guilty to financial fraud charges today when he appeared in federal court in Brooklyn, N.Y., according to a spokesman for the U.S. attorney handling the case.

Kumar and co-defendant Stephen Richards, the company's former worldwide sales head, both pleaded guilty to all eight counts against them, including securities fraud, obstruction of justice and perjury, according to the U.S. Attorney's office.

Sentencing is set for Sept. 12. Both men faced the prospect of up to 20 years in jail prior to their guilty pleas. That maximum sentence will be reduced because of the pleas, according to the U.S. Attorney's spokesman.

Kumar and Richards had been accused of fraudulent accounting practices, including falsely reporting hundreds of millions of dollars in revenue for licensing agreements during fiscal quarters in which the deals had not yet been finalized.

"The guilty pleas today of Computer Associates’ former CEO and its former head of worldwide sales are the culmination of the government’s successful investigation into a culture of corruption and fraud at Computer Associates,” said U.S. Attorney Roslynn Mauskopf.

"By choosing to lie repeatedly about Computer Associates’ financial position, the defendants violated their shareholders’ trust and the federal securities laws," Mauskopf said in a statement. "They then compounded those lies, and further damaged the corporation, by presiding over a massive cover-up."

“The pleas entered today are admissions of guilt in one of the largest corporate accounting fraud schemes on record,” said FBI Assistant Director-in-Charge Mark Mershon. “The actions of these defendants, along with others who have already pled guilty, led to the deliberate misstatements of Computer Associates’ revenues to the tune of over $2 billion. This apparent but ephemeral performance by the company propped up its stock price, causing investors to suffer untold losses when the scheme collapsed."

According to a statment from Mauskopf's office, Kumar and Richards admitted obstructing the government’s investigation by offering false explanations for fraudulent accounting practices to the company’s lawyers, with the intent that those lawyers would repeat the explanations to government investigators. The two men also lied to federal agents in an effort to conceal the scheme, the statement said.

Several former CA executives have already pleaded guilty to related charges and were expected to testify against the two men. CA, which earlier this year changed its name from Computer Associates International Inc. to CA Inc. as part of an attempt to improve its image in the wake of the fraud charges, was forced to pay $225 million in 2004 to compensate victims.

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