Risk Management

CA Told It Can’t Sue Wang and Ex-CFO

A judge scolds the company for trying to "railroad" him into setting aside a statute of limitations on a settlement deal with shareholders.
Stephen TaubOctober 11, 2007

CA Inc. on Wednesday suffered a setback in its attempt to alter a 2003 shareholder settlement agreement so it could sue former top executives who were not part of the deal, including a former chief financial officer.

Federal judge Thomas Platt told CA it missed its chance three years ago to alter the settlement agreement, which protects former executives from being sued for the software giant’s $2.2 billion accounting scandal, Newsday reported. The agreement included a one-year statute of limitations on reopening the settlement.

CA wants to pursue restitution from former chairman Charles Wang, former chief financial officer Peter Schwartz and several others who have not settled claims with the company, according to the report. Back in April, a special litigation committee for the CA board released a report alleging that the men directed and participated in the fraud and cover-up, the paper said. But Platt reportedly told the company he would not allow it to “railroad this court.”

A CA spokeswoman told Newsday, “We are awaiting the final hearing on the decision and considering all of our options, including potential appellate remedies.”

Former CA chairman and CEO Sanjay Kumar pled guilty in April 2006 to eight charges, including conspiracy, fraud, and obstruction of justice. Last November, he was sentenced to 12 years in prison and was fined $8 million for his role in the accounting fraud.

Kumar and other CA executives were accused of backdating contracts to inflate revenue. He and other executives were charged with instructing salespeople to complete deals after the quarter had closed, which came to be known inside the company as the “35-day month.”

Ira Zar, a former CFO of CA, received a relatively light sentence of seven months in prison and seven months of home detention.