CA to sue co-founder Wang over fraud

A special committee at CA has released a report blaming co-founder Charles Wang for accounting fraud at the company and recommending that he be sued for damages and the value of company stock he received.

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A special committee at CA has released a report blaming co-founder Charles Wang for accounting fraud at the company and recommending that he be sued for damages and the value of company stock he received.

The news came as Wang's successor, former CA chief executive Sanjay Kumar, was ordered to pay more than $1bn (£500m) in compensation to victims of the securities fraud he committed while at the company. Kumar also faces 12 years in jail following his conviction for obstruction of justice and securities fraud.

In a statement released by CA, Bill McCracken of the company’s special litigation committee said: "We conducted an independent, in-depth and extensive factual investigation, which included 90 interviews and the review of millions of pages of documents. We believe that we have reached the right conclusions regarding settlements, claims and dismissals.”

Wang released a statement blasting the report, according to the New York Times and other news outlets. Wang, who was not available for comment, blamed Kumar for the fraud.

The CA committee was formed to investigate what the report calls "a massive accounting fraud perpetrated by the company's senior-most executives from as far back as the late 1980s through 2001, and their cover-up of that fraud, which lasted through mid-2004".

The fraud was centred on the practice of extending financial quarters artificially to take in additional revenue prematurely – the so-called "35-Day month". CA was forced to restate $2.2bn revenues as a result.

The committee's report cites a "profound failure of leadership" and says CA never outgrew a "start-up mentality... that was incompatible with a publicly traded, multi-billion dollar, international software enterprise".

It says: "The fraud pervaded the entire CA organisation at every level, and was embedded in CA's culture, as instilled by Mr Wang, almost from the company's inception."

The committee charged Wang with causing additional harm to CA by creating a "culture of fear" and surrounding himself with young executives whom he and Kumar could easily dominate.

As an example, the committee cited Ira Zar, who was named chief financial officer in June 1998, despite having no professional experience outside CA and not being a certified public accountant. Zar "lacked the stature and experience” to recognise and prevent the serious ramifications of the 35-day month practice, the report says.

Wang retired from CA in 2002.

Additional reporting by Marc Ferranti

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