The cloud cast by an SEC probe into CA's finances has claimed another exec. Kumar will now be CA's chief software architect.

Darrell Dunn, Contributor

April 21, 2004

3 Min Read

A big ax fell at Computer Associates International Inc. Wednesday when the company announced that chairman and CEO Sanjay Kumar is out as leader of the management-software company, which is embroiled in a Securities & Exchange Commission investigation.

Kumar, who has led the company since 2000 and has been credited with reshaping the company's internal and external focus, will now serve as chief software architect, a newly created position. Kumar also has resigned from the board. An interim CEO is expected to be announced shortly, while a search for a permanent CEO is conducted.

Lewis Ranieri, who has served as the board's lead independent director since 2002, now is chairman.

Sanjay Kumar, former CEO of Computer Associates

Sanjay Kumar, former CEO of Computer Associates

Photo courtesy of CA

This is the latest repercussion of the SEC's investigation into CA accounting practices. A dozen CA employees have been fired or forced to resign as a result. Earlier this month, Ira H. Zar, the company's former chief financial officer, pleaded guilty to fraud and obstruction charges. He has been cooperating with investigators and has said two other senior executives conspired with him in manipulating the company's earning statements.

"I would assume they would want [Zar's] cooperation unless they are going after someone bigger, and who is bigger than Ira?" John DiFucci, an analyst with Bear Stearns, asked rhetorically. DiFucci says obvious targets are Kumar and Charles Wang, who served as CEO prior to Kumar.

He says there has been a "love-hate" relationship between Kumar and stockholders. While many credit Kumar as being a catalyst for positive change, others question his role in the earnings scandal and believe a change in direction is necessary, DiFucci says.

Finding a replacement for Kumar will be difficult. There's no one on the staff who would automatically jump out as a strong candidate, says Richard Ptak, an analyst and consultant with Ptak, Noel & Associates.

"You want to have a strong leader in there," Ptak says. "I'm sure Sanjay has already been doing an informal, or even formal, search to find someone to groom, but I don't know of anyone in Computer Associates today that could credibly step in and take his place."

CA's board issued a statement Wednesday saying it believes the steps taken by the company "are fair and responsive to the situation and in the best interests of CA's customers, shareholders, and employees."

While the examination by the company's internal audit committee and the board's review of the situation has resulted in the removal of a number of individuals from the company, according to the statement, "the changes in Sanjay's role are not based on the conclusion that he engaged in any wrongdoing. Nonetheless, the conduct in question occurred during his tenure."

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