Former CA Inc. chief Sanjay Kumar alleges his former mentorCharles Wang “personally directed” improper accounting at the company going back to 1987, and that several longtime board members “took steps to protect Wang and conceal the facts.”
In a 27-page affidavit filed in court yesterday as part of a lawsuit by Texas billionaire Sam Wyly, Kumar depicts a cover-up within a cover-up, alleging board members Lewis Ranieri and Alfonse D’Amato “had knowledge of” the accounting misdeeds for which he went to prison – going back “at least” to 2003. Yet the accusations, which he said he communicated to a special board committee through “many” interviews, never made it into a report the board publicly filed in 2006, documenting the scandal.
Kumar’s affidavit provides specific instances in which he allegesWang pushed him to close contracts after a quarter closed to meet earnings figures expected by Wall Street, in violation of accounting rules…
A spokesman forD’Amato and Ranieri, who resigned as board chairman last year, called the allegations “false.” “Mr. Kumar has plead guilty to lying to the company’s board, its lawyers and its investors,” said the spokesman. “It is regrettable that, from jail, Mr. Kumar continues to be a stranger to the truth.”
…The filing also implicates CA co-founder Russell Artzt, alleging he “actively participated in concealing CA’s improper accounting practices” from investigators and fellow board members. Kumar’s affidavit alleges Artzt, who was never implicated in the wrongdoing, helped the sales team finalize deals after a quarter had closed. He also allegedly urged Kumar to keep silent on Wang’s alleged involvement. Artzt “told me to remain silent because he thought thatD’Amato would ‘get this fixed,’” Kumar’s affidavit says.
…A spokesman for theU.S. attorney’s office in Brooklyn, which oversaw the government’s accounting fraud probe that resulted in Kumar pleading guilty, declined to comment.
The affidavit was filed as part of a lawsuit against certain former and current CA executives and directors by Wyly, a CA shareholder, hoping to recoup hundreds of millions in lost CA investments. William A. Brewer III, lead counsel for Wyly, said it “confirms a conspiracy and subsequent cover-up of epic proportions.”
Kumar allegesRanieri specifically directed him to keep details of the accounting improprieties from fellow CA director Walter Schuetze, saying former SEC chief accountant Schuetze would “have a heart attack” if he knew the extent of the misdeeds.
Since going to prison on a 12-year sentence last year,Kumar has been interviewed by government and private lawyers, said Lawrence McMichael, a Philadelphia-based lawyer for Kumar. He said Kumar “will talk to anybody who wants to talk to him and will tell them the truth.” Kumar’s appeal of his prison sentence will be heard later this month. A spokesman for the U.S. attorney’s office in Brooklyn, which oversaw the probe, declined to comment.
Michael Cornacchia, a former prosecutor on the case now in private practice in Manhattan, said investigators are apt to look with suspicion on Kumar’s claims unless there is “independent supportive or corroborating evidence.”If new evidence of obstruction were found, it could extend any statute of limitations on those crimes, he said, though the statute on accounting fraud has likely expired.
…Kumar said he discussed the late-booking practice withRanieri “during the government investigation,” which began in February 2002. In April 2003, he alleges, he told Ranieri a former CA joint venture partner was trying to blackmail the company about the improper accounting. He alleges Ranieri told him to “put the past behind me,” which he understood to mean “fix the problem at all costs.”
Kumar allegesD’Amato was “aware of Wang’s participation” in the accounting improprieties but “told me on more than one occasion that it was best not to discuss Wang’s involvement.”
Kumar charges thatD’Amato helped steer CA’s internal investigation to Robert Giuffra, a lawyer he knew well, despite Schuetze’s urging Kumar to interview several firms. Giuffra, a Sullivan & Cromwell lawyer, had worked with and for D’Amato and his brother Armand going back to the 1980s. “D’Amato made it clear that I should recommend Giuffra,” Kumar said, adding that Giuffra’s role was allegedly to conduct CA’s defense against the federal probe “to minimize” its “depth and any damage that might be done to D’Amato, Ranieri and Wang.”
Giuffra declined comment.
Kumar said he and Wang had a major falling out after Kumar introduced a new business model in 2000, alleging Wang “was regretting giving up the CEO title.” So Wang fired him over breakfast in November 2001, he alleges, though CA’s board reaffirmed Kumar’s post at a subsequent meeting…