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Kumar leaves CA

Jun 04, 20044 mins

Sanjay Kumar, Computer Associates International’s chief software architect and former CEO, has left the company, effective immediately, the company announced Friday.

Sanjay Kumar, Computer Associates’ chief software architect and former CEO, has left the company, effective immediately, the company announced Friday.

Kumar stepped down as CA’s chairman and CEO in April, following questions about his role in an accounting fraud that saw CA systematically record revenue before contracts were finalized to inflate its quarterly financial results. The accounting scheme took place during CA’s 2000 and early 2001 fiscal years, and affected revenue of $2.2 billion.

He was replaced as CEO by interim CEO Ken Cron.

In a statement, Kumar said he hoped his resignation would allow CA to move forward with its business plans. “It has become increasingly clear to me in the past few days that my continued role at CA is not helping the company’s efforts to move forward,” he said in a press release distributed by CA. “I understood that my stepping down as chairman and CEO represented a break with the past, but I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue.”

Investigations by the U.S. Securities and Exchange Commission and the U.S. Department of Justice into CA’s accounting practices continue, even after four former executives pleaded guilty to criminal charges. CA’s press release said the Islandia, N.Y., software company cannot predict the scope of those investigations.

“The board is committed to reaching a settlement of the government’s investigation into the company’s past accounting practices as quickly as possible,” CA board chairman Lewis Ranieri said in Friday’s statement. “We are working hard to take the remedial steps necessary to put this entire matter behind CA. Sanjay’s decision to leave CA was made in that spirit.”

The move comes less than two weeks after CA’s annual user show, CA World, at which Kumar and other company executives assured customers that the charismatic executive was adjusting well to his new role. Analysts said that while the timing of the move is surprising, Kumar’s decision to leave is not.

“This potentially removes another obstacle to arriving at a settlement with the regulators,” said financial analyst Gregg Moskowitz, of the Susquehanna Financial Group. CA’s internal investigation of its accounting fraud turned up no evidence of wrongdoing by Kumar, but because the scheme took place on his watch as the company’s president and chief operating officer (a position he held for several years before rising to CEO), he is believed to be a target of the government’s continuing inquiries.

Kumar’s departure might also ease the company’s search for a permanent CEO and chief financial officer. The continued presence on the executive team of the company’s former leader may have deterred some candidates, Moskowitz said.

Kumar was a popular figure with customers. Satisfaction with CA’s sales tactics and customer service has noticeably increased in the past few years, thanks to changes Kumar implemented. Still, attendees at the CA World show were largely unconcerned about the company’s management churn and accounting violations.

“As long as everything is going okay with the products, we don’t mind any changes. It’s an internal affair,” attendee Beatrice Sirchis, head of an Israeli telecom’s computer security department, said at the time.

“CA has a very loyal following,” said industry analyst Ron Schmelzer, of ZapThink. “A very large part of their business is international, and I think people in other countries tend to see these accounting problems as being very U.S.-specific. As long as the company is stable and satisfying its customers and producing new products, the customers are happy.”

Since the government investigations picked up steam earlier this year, CA’s board has made a number of changes to promote the company’s stability, including the reconstruction of CA’s management team. Ranieri, an experienced Wall Street veteran, is leading CA’s settlement negotiations with the government. While not commenting on the timing or severity of the sanctions he expects, Ranieri said at CA World that he does not believe regulators are interested in shutting CA down — as happened with Enron auditor Arthur Andersen.

Kumar spent 17 years at CA, and when he stepped down as the company’s leader other executives emphasized the value of his expertise and the importance of his new, visionary role. While the loss of any one executive is unlikely to drastically affect a company CA’s size, his departure will leave some holes, Moskowitz said: “Sanjay was much more active than most CEOs of the software companies I track in dealing with customers. I don’t think you can take that lightly. They’re losing somebody who really put his footprint on the company and has been influential in helping turn the company around.”