Federal investigators step up CA probe
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The federal criminal investigation into accounting practices at Computer Associates has widened significantly in recent weeks, it is being reported.
Evidence gathered by prosecutors from former employees and customers alleges that CA has improperly boosted revenue for several years - booking cash upfront from long-term contracts, shifting revenue between quarters and bundling 'free' software in IT services deals.
CA's chairman and co-founder, Charles Wang, resigned suddenly last week, but it said Wang's resignation was unrelated to the investigation.
Responding to the new allegations, the company denied any wrongdoing and suggested most of its sales representatives did not understand how the company accounts for licence revenue. "CA does not throw in software for free," it said.
The US Justice Department and the Securities and Exchange Commission have been poring over CA's accounts since the end of 2001. The present management of CA has tried to distance the company from the probe, maintaining that investigators have been concerned only with 'historical' accounting practices surrounding a $1.1 billion bonus to senior executives in 1998.
But the new claims, which came to light in a New York Times article, suggest that investigators are now studying transactions from as recently as 2001 - around the time that CA adopted controversial pro forma reporting techniques.
The CA development comes amid a series of scandals in the technology industry. A seemingly endless stream of software and hardware suppliers and telecommunications network operators have had their accounts probed by federal investigators during 2002.
Last week, on 21 November 2002, a federal grand jury indicted Phillip White, the former CEO of database software company Informix, on financial accounting fraud charges. White, 60, faces a maximum of 10 years in prison for each of the eight counts alleged in the indictment.
Also last week, federal prosecutors won their first conviction in the investigation of Peregrine Systems, the asset management software company. Ilse Cappel, a former assistant treasurer, admitted she participated in a conspiracy to falsify invoices and manipulate key financial data. Cappel, 40, faces a maximum penalty of five years in prison and a $250,000 fine.
