The former vice president of finance for Computer Associates admitted in court Thursday that he helped backdate hundreds of millions of dollars worth of contracts as part of a broad conspiracy to inflate the software firm’s quarterly earnings.
“I joined Computer Associates with good intentions,” David Rivard said after pleading guilty to conspiracy to commit securities fraud and obstruct justice. “I should have walked away.”
Ira Zar, Computer Associates’ former CFO, and David Kaplan, a former senior vice president, were expected to plead guilty to similar charges Thursday afternoon. A prosecutor in the case said the pleas were a significant development in the government’s investigation of accounting practices at the Long Island-based software maker, which said it had billions of dollars in annual revenue in the late 1990s.
Stated revenues plunged after it changed its accounting practices in the face of increased outside scrutiny.
“The investigation is proceeding and its pace is taking a rapid turn,” Assistant U.S. Attorney Michael Cornacchia said.
Rivard’s cooperation with the government means he will almost certainly receive less than the maximum 10-year sentence allowed for the two charges.
The Securities and Exchange Commission also filed actions Thursday against Zar, Rivard and Kaplan, charging each of them with committing accounting fraud while at Computer Associates.
Rivard, 36, joined Computer Associates in 1998, making $140,000 a year as its vice president of sales accounting. He told Judge I. Leo Glasser after his plea that he discovered the company was reporting revenue from software licensing contracts before they were signed so that the company could include extra earnings in its quarterly earnings reports, fraudulently boosting its stock price.
Rivard began to participate in the scheme, which prosecutors on Thursday called “a systematic, companywide practice of falsely and fraudulently recording and reporting” revenue.
Employees referred to one practice as the “35-day month,” prosecutors said, because company accountants would extend the booking of revenues in the final month of a fiscal quarter, days beyond the true end of the month.
The SEC said that during the company’s fiscal year 2000, Computer Associates “prematurely recognized” more than $1.4 billion in revenue from at least 116 contracts that had not yet been signed.