updated 9/23/2004 11:53:15 AM ET 2004-09-23T15:53:15

The former CEO of Computer Associates International Inc. pleaded not guilty Thursday at his arraignment on federal securities fraud and other charges, the most senior official of the software maker to be charged in a multibillion-dollar accounting scandal.

The charges against the former chief executive, Sanjay Kumar, were revealed Wednesday after the company agreed to pay $225 million to shareholders in a settlement allowing it to defer criminal prosecution.

Among the charges against Kumar in the 10-count indictment are obstruction of justice, conspiracy to obstruct justice and making false statements to law enforcement officers. Also charged in the indictment was the company’s former head of worldwide sales, Stephen Richards.

Kumar, who did not speak at the arraignment other than to give his age — 42 — and say he is “not guilty,” released a statement through his lawyer on Wednesday, saying he “denies any wrongdoing and expects to be exonerated of all charges.” Richards, 39, also pleaded not guilty in an appearance before U.S. District Judge I. Leo Glasser.

Both men were ordered to post $5 million personal recognizance bonds, surrender their passports and limit their travel to the United States. Kumar’s attorney, John P. Cooney, said his client may need to travel outside the country on business, but would apply to the court for special permission to make those trips if the need arises.

They were ordered to return to court on Nov. 23.

Under the unusual deal approved Wednesday to defer prosecution of the company, an outside monitor will track Computer Associates’ financial reporting while it makes three restitution payments of $75 million over 18 months to shareholders.

Computer Associates Chairman Lewis Ranieri said the deferred prosecution lets the company take “a critical step in closing this deeply troubling chapter in its history.”

Computer Associates, the world’s fourth-largest software maker, restated its financial results from 2000 and 2001 in April to reflect $2.2 billion in revenue that was improperly booked. Three former executives admitted that month that they fraudulently recorded hundreds of millions of dollars worth of contracts in a conspiracy to inflate quarterly earnings.

Prosecutors referred to one fraudulent accounting practice as the “35-day month” 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 to match or exceed earnings estimates.

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.

The Long Island-based company said it had billions of dollars in annual revenue in the late 1990s. Reported revenues plunged after the company changed its accounting practices in the face of increased outside scrutiny.

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