Former CA executive pleads guilty to SEC charges

A former Computer Associates International (CA) financial executive pleaded guilty Thursday to charges of accounting fraud, acknowledging what investigators called a “widespread practice” at CA of prematurely booking revenue from software contracts before they closed.

A former Computer Associates International (CA) financial executive pleaded guilty Thursday to charges of accounting fraud, acknowledging what investigators called a “widespread practice” at CA of prematurely booking revenue from software contracts before they closed.

Lloyd Silverstein, formerly the company’s senior vice president of finance, entered the plea in U.S. District Court in Brooklyn. He left CA last October, along with his boss, CA Chief Financial Officer Ira Zar, and a third financial executive, after CA admitted an internal investigation turned up evidence of premature bookings during its 2000 fiscal year.

In its compliant against Silverstein, the U.S. Securities and Exchange Commission (SEC) charges that during “at least” CA’s 2000 fiscal year, the company violated generally accepted accounting procedures by recording during several quarters revenue from contracts not finalized during those quarters. CA falsified dates on 95 contracts during the fiscal year, improperly recognizing more than $1 billion in revenue, according to the SEC.

The SEC alleges that Silverstein condoned CA’s habit of “extending” quarters for a few extra days and knew employees were backdating contracts to conceal their actual execution dates. He faces financial penalties and up to five years in prison on the charges.

No other charges been filed against any other former or current CA executives, but the SEC’s investigation is ongoing. CA said last week it has received notice from the SEC that the agency is considering civil action against the company. CA has 30 days to respond.

CA CEO Sanjay Kumar, who served as the company’s president and chief operating officer during the period in which the accounting violations occurred, has said before that a late 2000 change in how CA records revenue ensures that the company’s current accounting is legitimate. The company has turned over most of its board of directors in the past two years, and the reconstituted board is conducting its own investigation of the company’s accounting. That probe is ongoing.

CA, based in Islandia, N.Y., said in a statement Thursday that it will continue cooperating with the government’s investigation, and that it hopes to resolve the matter as soon as possible. It said it is unable to predict the scope or timing of the investigation, and that it is aware the probe could result in civil and criminal charges.