Ex-CEO Kumar breaks ties with CA

By : |June 5, 2004 0

Wei Gu

NEW YORK: Sanjay Kumar, who headed Computer Associates International Inc. during a period that is now the subject of an accounting probe, has agreed to sever his business relationship with the company, Computer Associates said on Friday.

CA said Kumar, who had taken the title of chief software architect in April when he resigned as chairman and chief executive, agreed to end all business involvement with the company as it seeks to resolve the government probe.

“The board is committed to reaching a settlement of the government’s investigation into the company’s past accounting practices as quickly as possible,” said Chairman Lewis Ranieri. “We are working hard to take the remedial steps necessary to put this entire matter behind CA. Sanjay’s decision to leave CA was made in that spirit.”

CA, whose shares rose 2.7 percent, last week said it had offered the government $10 million to settle the case.

Kumar becomes the 16th executive pushed out of Computer Associates in recent months due to the probes. Four former executives have pleaded guilty to charges including securities fraud. At issue in the probes has been early booking of revenue in order to meet Wall Street estimates.

Kumar, who has not been charged with any wrongdoing, was president of CA its fiscal year ended March 31, 2000 — when more than $1.4 billion in contracts were booked early.

The Islandia, New York-based software maker said the investigations by the U.S. Attorney’s office and Securities and Exchange Commission are continuing. It said it could not predict the scope, outcome or timing of the investigations.

Kumar’s decision to leave the company surprised some analysts because he was still seen as a behind-the-scenes rainmaker.

“It came a little bit earlier than I thought,” said Richard Petersen, an analyst with Pacific Crest Securities. “I see this as another step in a process, it is the right thing to do.”

In a statement, Kumar said it has become increasingly clear to him in the past few days that his continued role at CA was not helping the company’s efforts to move forward.

“I understood that my stepping down as chairman and CEO represented a break with the past,” he added. “But I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue.”

Shares of CA rose 71 cents to $27.01 on the New York Stock Exchange near midday.

Kumar’s lawyer, Jack Cooney, said, “Mr. Kumar said he plans to take some time off with his family and will not consider his career move for some time.”

A CA spokesman said the company will not fill the chief architect position and declined to comment further.

Kumar’s resignation seemed in contrast with recent comments by several CA executives, who said Kumar had adopted a diminished but still prominent role at the company — including talking to CA’s most important customers and partners such as Bill Gates.

Chairman Ranieri, had earlier said that the government was aware of Kumar’s role at the company, otherwise the company would not allow him to stay.

But another director, Harvard Business School professor Jay Lorsch said, “Sanjay’s role is really out of our control.”

A spokesman for federal prosecutors in Brooklyn declined to comment on Kumar’s departure.

Four former executives, including former Chief Financial Officer Ira Zar, pleaded guilty to charges including securities fraud and obstruction of justice this year. The company restated results for two years in which it booked more than $2 billion revenue early.

© Reuters

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