COMPUTER ASSOCIATES KUMAR ADDRESSES REUTERS TELECOMS SUMMIT
Henny Ray Abrams  /  Reuters
“I understood that my stepping down as chairman and CEO represented a break with the past, but I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue,” Sanjay Kumar said Friday.
updated 6/4/2004 1:28:02 PM ET 2004-06-04T17:28:02

Sanjay Kumar, who stayed on as Computer Associates International Inc.'s chief software architect after an accounting scandal forced him from the chief executive and chairman jobs, left the company Friday.

Kumar resigned from the top jobs in April, tainted by an accounting debacle that has produced four guilty pleas from top executives. Days after his resignation as CEO and chairman, the company restated its earnings from 2000 and 2001 to reflect $2.2 billion in improperly booked revenue.

"I understood that my stepping down as chairman and CEO represented a break with the past, but I have reluctantly concluded that as long as I hold any position, focus on past issues and my current role will continue," Kumar said Friday.

Computer Associates, a $3 billion management software company, is under investigation by federal prosecutors and the Securities and Exchange Commission for lying about the timing of contracts in order to meet quarterly earnings targets.

Former chief financial officer Ira Zar is one of the four former CA finance executives who have pleaded guilty to fraud or obstruction of justice. Zar implicated two other high-ranking executives; although their names were not disclosed, prosecutors noted Zar reported to Kumar.

One of CA's accounting problems was a practice the board has acknowledged, called the "35-day month," in which employees inflated revenue by closing quarterly books a few days late.

Kumar's decision to leave was made "in the spirit" of putting the company's problems behind it, chairman Lewis Ranieri said Friday.

"The board is committed to reaching a settlement of the government's investigation into the company's past accounting practices as quickly as possible," he said. "We are working hard to take the remedial steps necessary to put this entire matter behind Computer Associates."

Ranieri said in April that the company had spent $30 million on its own investigation, led by the former chief accountant for the SEC, and in responding to inquiries from regulators and prosecutors.

The company is now led by interim chief executive Ken Cron. The former head of Vivendi Universal's games division, Cron said when appointed that he would lead the company on a temporary basis only.

Despite the turmoil at the top, CA's stock has climbed in the last 12 months. In midday trading on the New York Stock Exchange, the stock was up 71 cents, or 3 percent, to $27.01.

"This is one of the largest software companies in the world," said Gregg Moskowitz, a research analyst at Susquehanna Financial Group. "No one person will materially change the complexion of it or the perception of it."

But Kumar, who joined CA at 25, has been as strongly identified with the company as its founders.

Kumar emigrated from Sri Lanka to the United States when he was 14. He joined Computer Associates in 1987 when it bought Uccel Corp., where he had been director of software development.

Kumar, known for being a hands-on leader, became CA's president and chief operating officer in 1994. Kumar took over as chief executive in 2000 and chairman in 2002, the hand-picked successor of CA founder Charles Wang.

Together, Wang and Kumar bought hockey's New York Islanders in 2000 for an estimated $190 million.

In 1998, Kumar, Wang and CA co-founder Russell Artzt came under fire after they shared a stock bonus worth $1.1 billion just months before Computer Associates warned of a slowdown in business.

The board's compensation committee at the time included New York Stock Exchange Chairman Richard Grasso _ who resigned from the exchange last year amid outrage over his $187 million pay package and is now facing a lawsuit filed by New York's attorney general related to his pay.

Three years ago, billionaire investor Sam Wyly pushed for the ouster of Kumar, Wang and Zar for a "lack of integrity." Wyly lost his proxy fight but took credit for forcing changes at CA. Among them: The creation of a corporate governance position and increased use of independent directors on the board.

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