The US government has expanded its case against former Computer Associates head Sanjay Kumar. The revised indictment provides more details of distorted accounting that caused the company to restate its financial results.
A number of former CA officials, including the company's ousted chief financial officer and general counsel, have pleaded guilty to charges connected to the fraud. The government is preparing to go to trial on charges against Kumar and CA's former worldwide sales head, Stephen Richards. Both have pleaded not guilty.
In the revised indictment, the government adds more details that it says prove Kumar and Richards knowingly distorted CA's accounting and took steps to hide their actions.
In early 2000, CA signed a $44.5 million licence deal with a "nearly insolvent" customer in which it also had an ownership stake, then backdated the contract so it could be recorded in the prior quarter, according to the indictment. The next quarter, expecting that it would not be able to collect on the contract, CA reversed the revenue in its internal records but did not publicly restate its results, the indictment says.
It also accuses Kumar of authorising a $3.7 million consulting contract in early 2003 that acted as hush money for an unnamed executive at a CA customer company who knew of CA's accounting improprieties. This executive had arranged a $27 million licence contract with CA in March 2000, but as part of the deal, CA spent a similar amount on software from the executive's company, according to the indictment. Neither software package was ever used, making the deal a "revenue swap" that cannot legally be treated as a sale. The indictment claims that the unidentified executive threatened to alert government investigators to the arrangement, prompting Kumar to arrange the consulting payoff.
Sentencing hearings for the CA executives who have pleaded guilty have been adjourned until after the trial against Kumar and Richards commences, because several of those executives are expected to testify at the trial, according to Assistant US attorney Eric Komitee.