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November 2, 2006 6:23 pm

Former CA chief gets 12 years in jail

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Sanjay Kumar, the former chief executive of Computer Associates, was sentenced to 12 years in federal prison and fined $8m on Thursday for his role in a $2.2bn accounting fraud at the New York-based business software firm.

Kumar, aged 44, had faced up to life in prison after pleading guilty in April to charges including conspiracy, securities fraud and obstruction of justice at the company, which since has been renamed CA.

The sentence was imposed after Assistant US Attorney Eric Komitee told Judge Leo Glasser that Kumar’s actions represented “the most brazen and comprehensive obstruction in the modern era of corporate crime.”

Judge Glasser said though Kumar was not a violent criminal, he “did violence to the legitimate expectations of shareholders.”

As part of the accounting scheme, Kumar improperly booked software license revenue from 1999 to 2000 in order to meet Wall Street analysts’ profit expectations and then lied to investigators about it, investigators said.

According to the indictment, the former CA chief executive was so involved with adding false revenue to a financial quarter after it closed that he flew on a corporate jet to Paris in July 1999 to finalize a $19 million deal and signed a contract that had been backdated.

The indictment also charged that Kumar and other executives instructed salespeople to complete deals after the quarter had closed - a practice known within the company as the ‘35-day month’ – and then ‘cleaned up’ contracts by removing time stamps from faxes.

After the US Federal Bureau of Investigations began investigating the company in 2002, prosecutors said Kumar orchestrated a cover-up that involved lying under oath about the ‘35-day month’ and other frauds and trying to buy the silence of a potential witness, authorities said.

Kumar, who stepped down as chairman and chief executive of Computer Associates in April 2004 after the full scale of the fraud became apparent, told the judge at his sentencing, “I know that I was wrong and there was no excuse for my conduct.” He was ordered to surrender on February 27.

After the fraud was discovered Computer Associates restated its results for fiscal 2001 through 2004, agreed to pay $225m in shareholder restitution and continues to cooperate with the government as part of a deferred prosecution agreement.

Lawyers for Kumar, who is also a former co-owner of the New York Islanders hockey team, described him as one of the “great minds” of the software industry who turned Computer Associates into a thriving enterprise. “I hope the court will not lose sight of the good he did for that company,” said attorney John Cooney.

■William Sorin, the former general counsel of Comverse, the voicemail software group, yesterday became the company’s second top executive to plead guilty to charges stemming from options backdating, Kevin Allison reports from San Francisco.

He faces up to five years in jail. Last week, Daniel Kreinberg, Comverse’s former chief financial officer, pleaded guilty to backdating charges as part of a plea deal. Authorities are seeking custody of Jacob “Kobi” Alexander, Comverse’s founder and former chief executive, who is also facing fraud charges.

Mr Sorin will be sentenced in February.

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