Ex-Computer Associates CEO pleads guilty

April 25, 2006|By ROBERT E. KESSLER | ROBERT E. KESSLER,NEWSDAY

Sanjay Kumar, who went from living in a mud-floored home in Sri Lanka to being chairman and chief executive officer of Computer Associates International Inc., pleaded guilty yesterday to orchestrating a sweeping fraud to keep the company's stock afloat and lying about his actions to federal investigators.

Pleading guilty with Kumar in U.S. District Court in Brooklyn was Stephen Richards, a New Zealand native with a fondness for racing sports cars, who was executive vice president for worldwide sales for the Long Island company.

Kumar and Richards pleaded guilty to the same seven counts: securities fraud; conspiracy to commit both securities and wire fraud; three counts of filing false statements with the Securities and Exchange Commission; conspiracy to obstruct justice; and obstruction of justice.

In addition, Kumar pleaded guilty to making false statements to FBI agents and Richards pleaded guilty to perjury for lying to investigators from the Securities and Exchange Commission.

Both declined to comment after they were released on $5 million bail each. So did Kumar's attorney, John Cooney, and Richards' attorney, David Zornow; Amy Walsh, the chief federal prosecutor in the case; and Eric Corngold, the chief assistant U.S. attorney.

The pleas were made suddenly and surprisingly. Kumar and Richards were scheduled to go to trial in two weeks, and the pleas apparently did not involve a plea bargain. There also was no immediate indication that they had any information to give federal prosecutors against other officials at Computer Associates, now called CA Inc.

The two apparently were throwing themselves on the mercy of the court and the court's interpretation of federal sentencing guidelines, sources said. The minimum sentence for each is about 10 years.

CA has avoided being indicted by cooperating with prosecutors, agreeing to pay a $225 million fine and hiring an independent monitor to oversee its financial operations.

Several sources said Kumar and Richards decided to plead guilty after federal prosecutors in the last several weeks turned over large amounts of material that the government intended to use at the trial. The material indicated that the obstruction of justice charges would be almost impossible to overcome, the sources said.

That material was handed over privately, but prosecutors in public filings have stated that they had evidence that Kumar had erased possibly incriminating e-mails from his personal computers.

The overall scheme for which Kumar and Richards pleaded guilty involved backdating hundreds of millions of dollars in sales agreements to make them appear as if they had occurred in earlier quarters of the fiscal year. This was known at Computer Associates as having "35-day months" or "keeping the books open," the indictment said.

The aim was to make CA's profits match or exceed the estimate that Wall Street analysts expected the company to report, according to the federal indictment filed two years ago.

Robert E. Kessler writes for Newsday.

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