Following a wave of indictments this month that netted
guilty pleas to securities fraud and other charges from several
former finance executives at Computer Associates International,
speculation is turning to the fate of the company's chief executive
officer.
CA has already admitted to improper accounting practices in its
2000 financial year which were under investigation by the US
Securities and Exchange Commission (SEC) and US Department of
Justice (DOJ).
The company has since revamped its accounting methods, replaced
most of its board and pushed out a number of executives tainted by
fraud. But one executive, Sanjay Kumar, now serves as the company's
chief executive officer, and questions remain about the
then-president and chief operating officer's involvement in CA's
accounting manipulations.
Last October, the DOJ complaint against Ira Zar, CA's then-chief
financial officer, charged that he regularly met with two other
unnamed "high-level" executives who allegedly knew and approved of
the financial sleight of hand. Zar at the time reported directly to
Kumar, who, in turn, answered to then-chairman and chief executive
officer Charles Wang, a company co-founder who has since
retired.
The DOJ is continuing its investigation in conjunction with the
SEC, and speculation in the IT and financial sectors persists that
Wang and Kumar may be targets of future actions.
Some financial analysts are already calling for Kumar's
resignation, arguing that as the company's operational head, he
either knew or should have known what was going on.
Mike Trigg, an analyst at Morningstar, issued a report
criticising CA for "a management team that we don't trust", and New
York-based Credit Suisse First Boston wrote of "increasing fear"
that Kumar is one of the DOJ's implicated but unnamed executives.
Credit Suisse called Kumar's forced departure "a scenario that is
being widely reported by Wall Street".
On 8 April CA released a statement acknowledging that the
company and its officers could face civil and criminal proceedings,
but it declined further comment.
When Kumar ascended in August 2000, he inherited a company that
investors did not trust and that customers castigated for hardball
sales tactics. In response, Kumar overhauled CA's accounting and
corporate governance, reformed its sales and customer service
organisations and made customer satisfaction a top priority.
If Kumar is indicted, some disruption is possible. "That would
get a lot of visibility. People would take notice," said Javed
Matin, chief executive officer of Myriad Solutions. "We'll have to
wait and see. I'm hoping it wouldn't have any adverse effects on
our business or CA's business."
Stacey Cowley writes for IDG News Service
CA fires nine amid accounting probe >>