Lloyd Silverstein, a former senior VP for finance, said the company had a "widespread practice" of allowing late booking of contracts to inflate sales figures.

InformationWeek Staff, Contributor

January 22, 2004

2 Min Read

NEW YORK (AP) -- A former senior vice president for Computer Associates International Inc. pleaded guilty to obstructing justice Thursday, saying the company had a "widespread practice" of allowing the late booking of contracts to inflate quarterly sales figures.

Lloyd Silverstein, 48, a former senior vice president for finance, entered the plea to a single count of conspiracy to obstruct justice in U.S. District Court in Brooklyn.

He admitted lying in September 2002 to federal prosecutors, FBI agents and members of the Securities and Exchange Commission during an investigation.

He said the illegal accounting practices spanned across August and September 2002.

After becoming a senior vice president in 1999, Silverstein became aware of what he called a "widespread practice" at the company of booking income in a particular quarter that did not occur in that quarter.

"I believed that it was wrong," he said, noting that the practice enabled the company to meet or exceed income expectations even when it otherwise would not have done so.

He said he not only agreed to follow the practice but expanded its effect by encouraging salespeople in the company to backdate some of their contracts so the income would count when the company wanted it to.

"My conduct in this regard was wrong and that's why I've come forth today," Silverstein told U.S. District Judge I. Leo Glasser.

In October, Silverstein was asked to resign from the Islandia, N.Y.-based company along with its chief financial officer and another vice president for finance.

Silverstein could face up to five years in prison and a $250,000 fine, along with restitution.

Sentencing was likely to be delayed depending upon his level of cooperation with the government.

The plea was consistent with the findings of an independent audit authorized by the company's board of directors and a federal probe to determine whether company executives manipulated revenue to boost the company's stock price.

Investigators sought to determine whether the company improperly backdated and forward-dated customer contracts to shift revenues between fiscal quarters.

The independent preliminary report found that a number of software contracts in the fiscal year ending on March 31, 2000, were signed after the end of the quarter, but appeared in the company's books as if they had been signed before then.

Walter P. Schuetze, an outside director and former SEC chief accountant who conducted the independent review, has said there was no evidence to suggest that the revenue from the contracts were not genuine.

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