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April 19, 2004

CA fires lawyers and accountants, CEO scrutinized

Nine more employees have been dismissed from Computer Associates International Inc, as the firm's formerly fraudulent accounting practices come under increasing scrutiny from regulators and law enforcement.

By CBR Staff Writer

The company did not disclose the names of the individuals let go. Four were in CA’s legal department, five were in accounting. All but one Atlanta-based employee were based at the company’s headquarters in Islandia, New York.

CA said in a statement the nine were terminated as a result of issues raised during the independent investigation by the CA Board of Director’s Audit Committee into the Company’s accounting practices.

The news came the same day as the New York Times reported that the CA board will meet, possibly as soon as today, to decide the fate of CEO Sanjay Kumar, who was COO and president at the time the fraud took place.

Four former senior CA accounting executives, including former CFO Ira Zar, have this year pleaded guilty to charges that they helped cook the books by recording revenue in the wrong quarters in order to meet Wall Street estimates.

The four have also agreed to settlements with the US Securities and Exchange Commission that preclude them from ever working as a director or in a senior management capacity at a public company ever again.

The SEC complaints filed over a week ago pseudonymously referred to at least three other executives who had direct knowledge of the scam, but also implied that others in the accounting department may have been in on it.

The SEC’s charges relate to the four quarters in CA’s fiscal 2000 year. After the end of each quarter, accountants would hold open the books for several days, until enough contracts had been signed to record revenue sufficient to hit estimates.

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CA did not return requests for comment on yesterday’s New York Times article, which cited three sources as saying the company’s board will meet to decide whether CEO Kumar can remain with the company.

Nobody has publicly accused Kumar of wrongdoing, but he held senior positions at CA during the bad accounting and the subsequent cover-up, which has led to suggestions that his job could be forfeit if only for the good of investor confidence.

The company also said yesterday it has responded to the Wells Notice sent it by the SEC. A Wells Notice alerts the firm that SEC staffers will advise the Commission proper file suit. The text of the response was not available at press time yesterday.

CA’s internal probe of its accounts, headed by former SEC chief accountant Walter Schuetze, is expected to shortly come to a conclusion on how the company should restate its revenue and earnings for the period the scam was taking place.

This article is based on material originally published by ComputerWire

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