CA Reports Improved Earnings; Ex-CEO Gets Jail Sentence - InformationWeek

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11/4/2006
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CA Reports Improved Earnings; Ex-CEO Gets Jail Sentence

Sanjay Kumar gets 12 years in prison and must pay $8 million in fines.


Should his sentence be served in 35-day months? -- Photo by Bloomberg News

Should his sentence be served in 35-day months?

Photo by Bloomberg News
CA may have finally put most of its unpleasant past to rest. The company, formerly known as Computer Associates, hopes that the sentencing last week of former CEO Sanjay Kumar will bring to a close the events that started in 2002 with an accounting scandal that resulted in the indictment or firing of several executives. Kumar pleaded guilty to eight counts of conspiracy, fraud, and obstruction of justice in April and last week was sentenced to 12 years in prison and fined $8 million. Kumar and others were accused of keeping the company's books open past the end of the quarter to inflate revenue. The so-called "35-day month" resulted in $2.2 billion in accounting fraud, prosecutors charged.

Former sales executive Stephen Richards is slated for sentencing on related charges next week. Other former executives have been indicted or fired during the course of the scandal, but CA avoided prosecution by committing to significant accounting changes and paying $225 million in restitution.

CA's current management tried to keep the focus on a better-than-expected financial report last week; second-quarter earnings were up 15% from a year ago, though CA's cash flow was down 98%. But the company still has a few pages before the book is fully closed on the past. It's pursuing the ill-gotten gains of Kumar and other former executives and remains under government supervision.

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