Former CA exec pleads guilty to accounting fraud

A former Computer Associates International financial executive has pleaded guilty to charges of accounting fraud, acknowledging...

A former Computer Associates International financial executive has pleaded guilty to charges of accounting fraud, acknowledging what investigators called a "widespread practice" at CA of prematurely booking revenue from software contracts before they closed.

Lloyd Silverstein, the former senior vice-president of finance, left CA last October, with CA chief financial officer Ira Zar and a third financial executive, after CA admitted an internal investigation turned up evidence of premature bookings during its 2000 financial year.  

The US Securities and Exchange Commission (SEC) charges that during "at least" CA's 2000 financial year, the company violated generally accepted accounting procedures by recording during several quarters revenue from contracts not finalised during those quarters. CA falsified dates on 95 contracts during the year, improperly recognising more than $1bn in revenue.

The SEC alleged that Silverstein condoned CA's habit of "extending" quarters for a few extra days and knew employees were backdating contracts to conceal their actual execution dates. He faces financial penalties and up to five years in prison.

No other charges been filed against any other former or existing CA executives, but the SEC's investigation is still going on. CA said last week it has received notice from the SEC that the agency is considering civil action against the company. CA has 30 days to respond.

CA chief executive officer Sanjay Kumar, who served as the company's president and chief operating officer during the period in which the accounting violations occurred, has said before that a late 2000 change in how CA records revenue ensures that the company's existing accounting is legitimate.

The company has turned over most of its board of directors in the past two years, and the reconstituted board is conducting its own investigation of the company's accounting. That probe is also still going on.

CA said it will continue co-operating with the government's investigation, and hoped to resolve the matter as soon as possible. It said it is unable to predict the scope or timing of the investigation, and that it is aware the probe could result in civil and criminal charges.

Stacey Cowley writes for IDG News Service

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