A revised indictment filed this week alleges that Sanjay Kumar, former chairman and CEO of Computer Associates International, authorized what amounted to a $3.7 million bribe in 2003 to keep a business client from disclosing CA's illegal account practices.
The revised nine-count indictment, filed this week by U.S. Attorney Roslynn Mauskopf, charges Kumar and Stephen Richards, the Islandia, N.Y. software vendor's former head of worldwide sales, with securities fraud, conspiracy and obstruction of justice, making false Securities and Exchange Commission filings, perjury, and making false statements.
The revised indictment alleges that Kumar, when threatened by a business client named in the indictment only as "Individual #1," attempted to quiet the client by paying him millions for "consulting services" that were never performed.
The indictment alleges that Kumar was a man determined to hide an illegal practice of maximizing CA's earnings through the use of a "35-day month practice," which enabled CA to book licensing revenue it had not yet received.
"Individual #1 was the principal of a company that had entered into a $27 million license agreement with CA dated March 30, 2000," the indictment reads. "CA recognized part of the revenue associated with this contract in the fourth quarter. Without this revenue, CA would have missed the consensus earnings estimate for the fourth quarter."
The indictment also alleges that in 2003, Individual #1 told Kumar the fourth-quarter 2000 license agreement was a "favor" to CA, and that "future consequences" would impact CA if he was not compensated for the favor. Individual #1 urged Kumar "not to underestimate" his request for compensation, according to the indictment.
"In an effort to prevent the government from discovering that the license agreement with Individual #1's company constituted an improper 'revenue swap'... Kumar instructed Steven Woghin, then General Counsel of CA, to solve the issue raised by Individual #1," the indictment reads.
Then, alleges the indictment, Woghin and another senior CA executive traveled to Hawaii to offer Individual #1 money. There, Individual #1 threatened to report evidence of CA's accounting fraud to government investigators. In response to the threat, Kumar authorized CA to enter into a consulting agreement with Individual #1 to the tune of $3.7 million, according to the indictment.
Kumar arranged the offer while CA's accounting practices were already under investigation by the government, the indictment alleges.
"On several occasions, Kumar himself coached CA employees on how to answer [investigators'] questions without disclosing the existence of the 35-day month practice," the revised indictment reads.
In response to the revised indictment, CA issued the following statement: "Some former members of CA's management engaged in serious wrongdoing and we fully support the government's efforts to bring wrongdoers to justice."
Former CA CFO Ira Zar, and two senior vice presidents of finance, David Kaplan and David Rivard, have already pled guilty to unspecified charges related to the federal case against CA, which was settled in September. The settlement defers prosecution for a period of 18 months while CA demonstrates that it can comply with the settlement's requirements. CA was also ordered to set up a restitution fund of $225 million to repay past and present shareholders for losses caused by improper accounting activities.
Kumar departed CA June 4, 2004.