Billion lost in fraud at CA

Judge orders ex-CEO to repay shareholders

April 14, 2007|By Robert E. Kessler | Robert E. Kessler,Newsday

$1,023,600,000.

That's the amount of money that the stockholders of Computer Associates lost as a result of the accounting fraud by former Chief Executive Officer Sanjay Kumar.

Both Kumar, 44, and federal prosecutors agree on the number, which was computed by government economic consultants, according to court papers.

They also agree that Kumar is responsible for repaying shareholders as a result of a plea deal. Yesterday, in U.S. District Court in Brooklyn, N.Y., Judge I. Leo Glasser signed off on the pact in which Kumar will be required to pay $798 million in restitution. Kumar will be required to pay at least $52 million of that amount by Dec. 31, 2008.

But the stockholders shouldn't hold their breath expecting to get most of their money back. They'll be lucky to get a fraction of that, and most of what they will get already has been ponied up by the company, now known as CA Inc.

Kumar, convicted in November of conspiracy, fraud and obstruction of justice, is scheduled to begin serving a 12-year prison sentence in August at the federal prison in Fort Dix, N.J.

Kumar must repay the remainder of the money at the rate of 20 percent of his yearly income after he is released, the documents say.

About 95,000 people who bought Computer Associates stock between January 1998 and February 2002 are eligible to share in the restitution money placed in a fund set up by the courts. CA has put up $225 million to repay victims of the fraud. But the parties agree that it's unlikely that Kumar will be able to pay full restitution.

Despite the hundreds of millions of dollars that Kumar made in salaries and stock options while at the company, the $52 million is the bulk of that which remains in Kumar's name, according to several sources familiar with the case. A lot of the money was lost because of bad investments or a decline in the value of CA stock, sources said.

Kumar's wife and teenage daughters retain several million dollars and hard-to-sell property, along with millions of dollars in trust funds that the government will not seize, the sources said.

Kumar's lawyer, Lawrence McMichael, called the settlement fair, and said Kumar's wife and children were entitled to live as they had because they had not committed any crimes.

Peter Fleming, the attorney for Kumar's wife, declined to comment, as did prosecutors.

A number of other former Computer Associates executives convicted along with Kumar are theoretically responsible for repaying a portion of the money, but are all broke, the sources said.

Robert E. Kessler writes for Newsday.

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