Kumar pleaded not guilty on all ten counts of securities fraud conspiracy, obstruction of justice and conspiracy to obstruct justice. The Department of Justice says the maximum possible sentence if Kumar is found guilty is 100 years in jail.
Rather than obstructing any inquiry, Mr Kumar recommended that investigations be conducted by two outside law firms, Kumar’s lawyer, John Cooney said in a statement. Mr Kumar denies any wrongdoing and expects to be exonerated of all charges.
The former head of worldwide sales at the company, Stephen Richards, who was indicted alongside Kumar on Friday, also pleaded not guilty to similar charges, and not guilty to one count of perjury related to his alleged role in the alleged cover-up.
The court told both men to post a $5m bond, surrender their passports, and not leave the US, according to reports. Kumar’s lawyer reportedly said his client may need to leave the US on business, but will ask for court permission before doing so.
The charges relate to a fraud that took place during the company’s fiscal 2000, known as the 35-day month. Executives have admitted they held the books open after the end of reporting period in order to meet analyst earnings estimates.
In total, about $2.2bn was recorded incorrectly. All of the revenue was genuine, relating to software sales that were consummated, but the revenue was recorded in the wrong quarter. When the practice ended, CA’s share price took a dive.
Executives were paid bonuses based on the performance of CA’s share price, which was artificially inflated by the scam. CA and the US government said Wednesday they will try to recover these bonuses for shareholders.
CA’s shares were up about 6% in trading yesterday, perhaps due to the belief that the company has finally put its troubles behind it. The $225m payout equates to just a couple of months’ cash flow for CA, according to executives.
While it is clear from the confessions of CA and several former employees that the fraud and cover-up did in fact take place, the extent of the involvement of any given former CA employee will be up for the court to decide.
Several of Kumar’s former colleagues have pleaded guilty to similar charges, and CA has admitted multiple former CA officers, executives and employees engaged in a systemic, company-wide practice of falsely and fraudulently recording and reporting.
Cooney said that the government targeted Kumar and made plea bargains with involved members of Computer Associates’s finance and legal departments, referring to the many former CA executives to have already pleaded guilty.
On Wednesday, former general counsel Steven Woghin entered a guilty plea for securities fraud conspiracy and obstruction of justice. In January, Lloyd Silverstein, a former senior VP of finance, pleaded guilt to conspiracy to obstruct justice.
In April, former VP of finance David Rivard and former senior VP of finance David Kaplan pleaded guilty to conspiracy to commit securities fraud and obstruction of justice, and former CFO Ira Zar pleaded guilty to an additional count of committing securities fraud.
On Wednesday, CA agreed to give $225m back to shareholders wronged by the fraud. The US Department of Justice agreed to defer prosecution of the firm as long as the company brings in fairly strict corporate governance controls.
Kumar and Richards have been instructed by US District Judge Leo Glasser to appear again in the US District Court in Brooklyn, New York, on November 23, for a pretrial conference, according to reports.
