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Former CA executives admit role in $2.2bn accounting fraud

Tash Shifrin

Two former top executives at Computer Associates have pleaded guilty to fraud, perjury and obstruction of justice charges relating to a $2.2bn (£1.2bn) accounting fraud at the company in 2004.

Former chief executive officer Sanjay Kumar and his co-defendant, former head of sales Stephen Richards, pleaded guilty to the charges before US district judge Leo Glasser.

The two men have changed their pleas, after initially pleading not guilty in September 2004.

The CA scandal saw another former Computer Associates executive, Tommy Bennett, arrested and charged on Friday.

Glasser said, “In each of the four quarters of 2000, CA falsely reported hundreds of millions of dollars in revenues and licensing agreements.”

Prosecutors have alleged that the defendants “engaged in a systemic, company-wide practice of falsely and fraudulently recording and reporting” quarterly revenues associated with licence agreements. The company artificially extended months, in a practice known as “the 35-day month”, prosecutors claimed.

The obstruction charges relate to claims that, through false statements and concealment of information, Kumar and Richards interfered with government investigations into the fraudulent accounting.

Kumar has been accused of erasing his laptop's hard drive to destroy potential evidence.

In the wake of the fraud scandal, the company – now renamed CA – was forced to republish five years of accounts. It also agreed to pay $225m to settle with federal prosecutors.

The two men’s trial is scheduled to begin on 8 May.

 


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