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CA investigation raises questions about CEO's fate

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 >>


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