21 April 2004 Computer Associates chairman and CEO Sanjay Kumar has been forced to step down from both positions, as the long-running criminal probe into the company’s accounting practices reaches a climax.
The move follows a day long board meeting in which Kumar defended himself from claims over his involvement in the accounting scandal. Before the meeting, Kumar had expressed his confidence that the board would exonerate him.
But Kumar has not been sacked outright. He will stay on as the company’s chief software architect, a new position within the organisation. “These and previously announced actions are designed to meet the needs of shareholders while underscoring CA’s commitment to corporate accountability,” read a company statement.
Kumar will be replaced as chairman by board member Lewis Ranieri. The company also disclosed that they were immediately launching a search for a new CEO.
Kumar had become the focus of allegations that go back to the late 1990’s and 2000 when he was second in command, after founder Charles Wang. The board claims, however, that his departure is not an admission that he participated in any wrongdoing.
“The changes in Sanjay’s role are not based on the conclusion that he engaged in any wrongdoing,” said Ranieri. “Nonetheless, the conduct in question occurred during his tenure and the Board felt this action was appropriate.”
CA has been accused by the Securities and Exchange Commission of backdating sales to meet Wall Street revenue and profit estimates: running so-called ’35 day months’ at the end of the quarter to make its numbers. In its 2000 fiscal year, the company backdated more than $1 billion in sales.
The investigation has intensified in recent weeks after three former top executives, including the company’s former chief financial officer Ira Zar, pleaded guilty to charges of obstruction and securities fraud.
Kumar took over as CA’s CEO in 2000 and chairman in 2002. He claimed that he would make CA the “gold standard” in governance after it had become “a lighting rod for all kinds of allegations”. The company’s official biography credits him with enhancing “the clarity and timeliness” of the company’s financial reporting.
Ranieri said: “We are pleased that Sanjay has agreed to assume the role of chief software architect, enabling CA’s stakeholders to continue to benefit from his extraordinary knowledge, experience and expertise. He is highly regarded in the industry and has made remarkable contributions to CA’s business.”