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CA's Misstated Revenues Now Top $2 Billion; Sales Chief Canned

CA's Misstated Revenues Now Top $2 Billion; Sales Chief Canned

Computer Associates has sacked the head of its worldwide sales operation, EVP Stephen Richards, the latest executive claimed by the investigation of the revenue-inflating scandal that has gripped the company for several years now and stripped CEO and chairman Sanjay Kumar of his titles last week.

CA said Richards, believed to be the nameless "Executive 2" that the SEC identified in the indictment for conspiracy to commit securities fraud and conspiracy to obstruct justice brought against CA's former VP of finance David Kaplan, resigned.

The scandal has so far cost at least 16 senior managers their jobs, their reputations and possibly their freedom including the company's former CFO and general counsel. Many of them were reportedly asked to resign.

CA's audit committee, which has so far spent $30 million doing its own investigation, now says that it has found that a total of $2.2 billion was prematurely booked in fiscal 2000 and 2001.

Previously the company only owned up to illegally recognizing $1 billion and said the shenanigans were limited to fiscal 2000.

It now says $1.782 billion were falsely recorded in fiscal 2000 and another $445 million in fiscal 2001.

It is still unclear how far back in time CA's books are compromised.

Statements made in court by CA's ousted senior VP of finance Lloyd Silverstein, who is now cooperating with the authorities, suggested that CA's practice of holding the quarter open - its so-called 35- months - and booking unsigned contracts dates back to at least 1998.

After moving revenues out of some quarters and into others, the company is restating fiscal 2000 and 2001 and says revenues for '00 have been cut by $2 million to $6.092 billion but that net income and earnings were unaffected. Stockholder equity was reduced by $333 million.

Revenues for fiscal '01 increased by $558 million to $4.748 billion and the net loss dropped by $333 million to $258 million, with a corresponding decrease in the loss per share to 44 cents from $1.02.

CA this morning officially introduced Ken Cron, an independent board member, as its interim CEO to replace its ousted chief executive, now reduced to chief software architect, but understood to be the power behind the throne.

In his new job, Sanjay is supposed to "architect a new vision for the future."

The company is holding its breath waiting to see whether the government will charge Kumar with complicity, while it tries to negotiate a settlement with both the SEC and the Justice Department. It is unclear whether CA can stay out of court.

In a conference call this morning, Cron denied that he was interested in the CEO job long-term. The company is supposed to be organizing a search for a permanent replacement, but doesn't seem to have picked any headhunters yet. Kumar is believed to have hopes of reinstatement.

The CA board also named Jeff Clarke COO. Clarke is the HP refugee who joined the company a few weeks ago as CFO, replacing CA's indicted chief financial officer Ira Zar.

Clarke had been Compaq's CFO and was responsible for the Compaq side of the HP-Compaq integration team. Sanjay hired him.

The company said that R&D, technology services, legal and communications report to Cron and that sales, partnerships, business development, marketing, finance and HR report to Clarke. Clarke reports to Kron.

Mortgage maven Lewis Ranieri, also an independent director, has replaced Sanjay as chairman. He indicated CA intends to keep the roles of chairman and CEO separate.

Ranieri did not address the question of whether Clarke was in the running for CEO. Clarke will be replaced as CFO. Meantime, he will hold both jobs and said he intends to institute further reforms including reorganizing the finance department and instituting company-wide accountability and checks and balances.

Doug Robinson, who was interim CFO after Zar was canned in October, has been named controller, a new post at the company.

Clarke is also looking for a chief accounting officer who would ensure CA's integrity and policy adherence.

Meanwhile, Richards has been replaced by CA's senior VP for North American sales Greg Corgan. Corgan is clean. He didn't join the company until last year after CA had supposedly stopped the booking irregularities that got it into so much trouble and began reforming itself. He's supposed to be responsible for maintaining customer relations.

Corgan was with IBM for 24 years, including stints as general manager of IBM Software responsible for sales, marketing and technical support and senior VP of IBM's worldwide ERP solutions.

More recently, Corgan was senior VP of worldwide operations for the Terraspring infrastructure automation start-up that Sun bought, and president and CEO of OneChem Inc, a web application and connectivity services house.

Cron, whose forte is sales, said there would be no structural changes in the sales force and that it would stay divided between direct and indirect.

Ranieri claimed that despite the distracting upheaval of departures and arrivals there is "no sense of crisis" inside the company.

In mid-day trading CA stock was up 2.5% to over $29.

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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Most Recent Comments
NotSure 04/26/04 05:40:43 PM EDT

what he got, but here's why he got it!! (SEC Complaint filing vs Silverstein). Compelling reading for the curious!

Quezztion 04/26/04 05:38:18 PM EDT

I remember Silverstein in Jan faced up to five years in jail and a $250,000 fine. Anyone know what he got?

SadButTrue 04/26/04 05:37:19 PM EDT

Ever since the CA executive, Lloyd Silverstein, admitted in January lying to prosecutors and lawyers from the Securities and Exchange Commission in September 2002 about whether the company had booked revenue from unsigned contracts, I've lolst any faith in this company.

Silverstein said he lied after several executives senior to him told him to do so. He didn't identify the executives, but only a few people in Computer Associates' sales and finance divisions were senior to Mr. Silverstein, including Ira Zar, the former chief financial officer.

I shall never forget how, in an unusual statement issued after the hearing, the prosecutors said that they thought that Silverstein's plea would be only "the first step in uncovering a corrupt conspiracy at Computer Associates."

How right they were. After all only a few people in CA's sales and finance divisions were senior to Mr. Silverstein, including Ira Zar, the former CFO.

We now know he was guilty.

rht67 04/26/04 04:45:01 PM EDT

according to this, CA customers were already expressing reservations about dealing with a vendor with damaged credibility yesterday. Who could blame them?

Dismayed87 04/26/04 04:40:54 PM EDT

When Ira H. Zar, the company's former chief financial officer, pleaded guilty to fraud and obstruction charges, I thiought things were bad enough...but this just gets worse and worse

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