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Kumar pleads guilty in CA fraud case

By Ken Mingis, Computerworld
April 25, 2006 12:27 PM ET

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

No details were immediately available. Kumar and co-defendant Stephen Richards, the company's former worldwide sales head, both appeared in court this afternoon. Richards also pleaded guilty to charges in the case.

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.

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

"It's about time," said Dale Ross, senior database consultant at Polaris Technologies Ltd. in Calgary, Alberta, and a user of CA products. "Once you see guys like Sanjay led away in handcuffs, maybe it will put the fear of God in others."

Ross has been an enthusiastic early adopter of a new CA product, Unicenter Database Command Center, announced Monday, and has been familiar with CA and its products for years.

Since Kumar was charged and CA began making efforts to reform -- including hiring new top managers and an ethics officer -- the company has been "taking the right steps," Ross said, adding that he never felt CA had a cultural problem with poor ethics.

Rich Ptak, an analyst at Ptak, Noel & Associates in Amherst, N.H., said he was "surprised to some extent" to hear of Kumar's guilty plea. Ptak, who has met with Kumar in the past and has followed CA extensively, said the plea and the initial charges "are obviously not a nice thing for Sanjay."

Ptak said he "always respected Sanjay, since he seemed to be doing the right thing for the company and was moving it out from under the image of the old CA run by Charles Wang. That old image of CA seems to be in the past, although some competitors like to keep reminding people of CA's past."

Sanjay was "very customer-friendly, people-oriented, was getting things away from Wang's restricted management style by giving more responsibility to the managers," Ptak said. CA's current CEO, John Swainson, has gone even further with Sanjay's customer focus, he said.

"CA has done remarkably well, especially with getting reorganized with Swainson and company," Ptak said. "There is no question in my mind that the company has strong leadership and has made significant progress going forward. Clearly they were shell-shocked for a year or so, but now customers are pleased with the way things are working out."

In February, lawyers for Kumar and Richards had asked the judge in the case to dismiss charges that they interfered with government probes into fraudulent accounting practices at the Islandia, N.Y.-based software company.

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