Former Computer Associates International Inc chief executive Sanjay Kumar has been charged with securities fraud conspiracy and obstruction of justice in connection with a multibillion-dollar accounting scandal at the US software company.
The charges were unsealed on Wednesday after the company agreed to pay $225 million to shareholders in a settlement that allows it to defer criminal prosecution. An independent monitor will examine the company's financial reporting for at least 18 months. If the monitor finds Computer Associates is in compliance with its agreement with the Department of Justice, the company will face no prosecution.
The deal also settles securities fraud charges brought by the Securities and Exchange Commission.
The 10-count grand jury indictment against Kumar was returned last Friday. Stephen Richards, the company's former head of worldwide sales, was charged in the same indictment with securities fraud conspiracy, obstruction of justice, conspiracy to obstruct justice and perjury.
Through his attorney, Kumar denied any wrongdoing and said he expects to be exonerated. An attorney for Richards, David Zornow, said his client also was innocent, and that "The government has overreached in this case."
Under the unusual deal to defer prosecution of the company, the monitor will track Computer Associates' financial reporting while it makes three staggered restitution payments of $75 million to shareholders. In May, the company offered the government a $10 million settlement.
Deputy Attorney General James Comey said in Washington that the deferral gives Computer Associates "the opportunity to demonstrate that it has a culture that can be saved. Our focus is not on doing harm for harm's sake."
Computer Associates chairman Lewis Ranieri said the agreement lets the company take "a critical step in closing this deeply troubling chapter in its history."
"We fully support the government's efforts to bring all responsible parties to justice," Ranieri said. "In addition, we will do everything in our power to help the government recover unjust enrichments."
The company also agreed to make changes, including a company-wide ethics training program.
Computer Associates, the world's fourth-largest software maker, restated its financial results from 2000 and 2001 in April to reflect $2.2 billion in revenue that was improperly booked.
Three former executives admitted in April that they fraudulently recorded hundreds of millions of dollars worth of contracts in a conspiracy to inflate quarterly earnings. They entered guilty pleas under cooperation agreements that prosecutors called an important move toward indicting other high-ranking company executives.
The company agreed Wednesday to help the government retrieve any compensation and bonuses awarded based on fraudulent financial results. Three executives, including Kumar, split stock bonuses worth $1.1 billion in 1998.
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