27 April 2004 Computer Associates (CA) has sacrificed its former head of sales and restated revenues for 2000-2001 by more than $2 billion as it battles to fend off a criminal prosecution by the US government.
CA has been the subject of a federal accounting probe for the last two years.
But it has been under intense pressure since January 2004 when its former finance chief, Lloyd Silverstein, told a US court that a range of improper accounting methods including backdating of customer deals were rife at the systems management software company.
Silverstein, who pleaded guilty to obstruction of justice, went on to allege in his court testimony that senior executives at CA instructed him to lie to federal investigators.
The restatement of revenue follows an internal audit that has already led to more than a dozen firings and forced resignations.
The latest casualty is Stephen Richards, senior VP of worldwide sales, who was in charge of the sales force during 2000 and 2001. His removal follows the demotion of Sanjay Kumar from chairman and CEO to chief software architect earlier in April 2004.
Kenneth Cron, a director of CA since 2002 and former CEO of Vivendi Universal Games, has been appointed interim CEO.
CA also said that Jeff Clarke, who was appointed as chief financial officer three weeks ago, will now take on the role of chief operating officer. Greg Corgan, who joined CA last year as head of North American sales, will replace Stephen Richards as senior VP of worldwide sales.
Lewis Ranieri, who took over as chairman last week, said he hopes the conclusion of the internal accounting audit and the executive team shake-up will help bring a speedy end to the SEC investigations.
“We hope to be engaging the government very shortly in conversations to put this behind us as quickly as possible,” he said.
Although the restatement is large in revenue terms, the impact on CA’s net income is minimal and the company said it did not find any fictitious sales. Net income for 2000 is unchanged, while the loss for 2001 is actually reduced from $591 million to $258 million.
CA also admitted that more than $500 million in revenue was improperly booked prior to fiscal 2000 – a period in which Charles Wang, founder of CA, Sanjay Kumar and another CA executive, Russell Artz, received a controversial $1 billion shares bonus. However, CA said it would not be restating the results for this period as they are outside the required five-year accounting period.