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Ex-CA CFO & Reports Face Prison Time; General Counsel Fired

Ex-CA CFO & Reports Face Prison Time; General Counsel Fired

Three more ex-Computer Associates executives, including the company's former chief financial officer Ira Zar, pleaded guilty to charges of securities fraud, conspiracy to commit securities fraud and conspiracy to obstruct justice in a Brooklyn federal court Thursday afternoon.

They could go to jail for a long time. Zar, who admitted to all three charges, is looking at 20 years. He will be sentenced on July 22.

The three culprits will have to disgorge their ill-gotten gains and can never again serve as officers of publicly traded companies. They will also be fined.

Meanwhile, in a move that bodes no good, CA yesterday also fired its chief counsel Steven Woghin "effective immediately." He's the guy who had been interfacing with the government investigations. Woghin stepped down a week or so ago supposedly because he was "tired."

Besides Zar, the two others who showed up in court were VP of finance David Rivard and former senior VP of finance David Kaplan. Zar, Rivard and former senior VP of finance Lloyd Silverstein, the first ex-CA executive to plead guilty to civil and criminal charges, were forced to resign from the company last October when an internal investigation, organized by the CA board and run in parallel with on-going investigations by the SEC and the Justice Department, confirmed that upwards of $1 billion in revenues had been improperly booked in CA's fiscal 2000.

The SEC has said that premature bookings sometimes represented a third of CA's reported quarterly revenue.

Kaplan didn't leave CA until December. At the time, the company refused to discuss whether Kaplan, like the others, had been compromised by the scandal and attributed his departure to "personal reasons." Ironically it said he would "pursue other opportunities."

Thursday it said he had been asked to leave because he had declined to be interviewed by the board's audit committee investigating the shenanigans.

Zar is the highest-ranking officer to be indicted in the widening government probe of CA, which is believed to be out for the heads of CA founder and retired billionaire Charles Wang and CA's current president and CEO Sanjay Kumar.

The charges against Zar say he conspired with two people the government describes as Executive No. 1 and Executive No. 2 to backdate revenues.

Silverstein, who copped a plea, has told the authorities that CA cooked the books as far back as 1998, which suggests that revenues were inflated to rig CA's stock price so Wang, Kumar and CA co-founder Russell Artzt could qualify for a $1.1 billion bonus that they divided.

Zar, Kaplan and Rivard, like Silverstein, will also cooperate with the government investigations in exchange for a reduction in sentence and advance a probe that is going into its third year. By cooperating, Kaplan and Rivard, who were charged with conspiracy to commit securities fraud and conspiracy to obstruct justice, are looking at less than the 10-year maximum.

Silverstein has testified that he acted on the orders of his superiors and lied to the government's investigators. He also claimed "high-level" executives were aware of the crooked accounting.

The chief federal prosecutor for Long Island, where CA is located, described Silverstein's plea as "the first step in uncovering a corrupt conspiracy" at the company.

In late 200 CA changed the way it reported its sales allowing it to count some sales and earnings twice. The gimmick was reportedly a cover-up.

The SEC has told CA that it intends to take the company to court.

In a "we hardly knew them" statement CA put out after business hours Thursday - and CA previously declined to talk to anyone - it said the government investigation "could result in the institution of administrative, civil injunctive or criminal proceedings, including charges against the company and other officers of the company, the imposition of fines and penalties, suspensions or debarments from government contracts, and/or other remedies and sanctions."

It also said the audit committee is nearing the end of its investigation and its assessment of whether a restatement of other fiscal years is required under GAAP. It claimed the committee continues to "believe that the company's new business model and financial reporting are unaffected by the accounting practices that were in place prior to the company's adoption of the new business model in October 2000."

CA just hired Jeff Clarke, a former top executive at Compaq and Hewlett-Packard, as its new chief financial officer. Clarke is supposed to stick his finger in the dike. He could easily become the company's next CEO.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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