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9/24/2004
05:45 PM
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Feds Indict CA Ex-CEO Kumar

Months of legal woes and executive shuffling came to a resolution of sorts last week for Computer Associates. Federal prosecutors indicted former CEO Sanjay Kumar for back-dating contracts and encouraging employees to lie about it--charges he denies--and the software vendor agreed to repay shareholders $225 million in three payments over the coming year. That move helps the company avoid security-fraud charges. CA also agreed to have an outside examiner track its financial reporting over the next 18 months. The feds will drop charges against CA if no problems arise.

"It's a great thing for customers, who could start evaluating CA products on their merit," not Justice Department and Securities and Exchange Commission proceedings, says Rick Sturm, an analyst at Enterprise Management Associates.

Kumar, through his attorney, says he'll fight the charges. He suggests that two outside law firms conduct an independent investigation into the charges, an idea prosecutors aren't likely to accept despite his call that all CA employees cooperate.

Another potential target for prosecutors is CA founder Charles Wang, with longtime company observers wondering whether Kumar might flip on his mentor to cut a deal that would limit his criminal liability--and potential jail time.

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