Accounting Anomalies Continue for Computer Associates
In a prepared statement, “This increase in sales commission expense resulted from a new sales commission plan that did not appropriately align commission payments with the Company’s overall performance,” according to the Register.
Third quarter results will be adjusted to reflect $26 million in additional commission expense charges. The Register reports that this accounting change will delay a June 8 conference with financial analysts and the release of fourth quarter and full-year results.
In their prepared statement, “The Company also will report a material weakness in its financial controls relating to the forecasting, processing and monitoring of sales commissions. As stated above, the Company has not concluded its review of the matter and further adjustments may be necessary,” according to the Register.
CA has not been far from accounting scandals for the last several years. Back in April, their former CEO Sanjay Kumar and his head of worldwide sales, Stephen Richards, plead guilty for their part in the “35 day month” accounting scandal that was actually perpetrated back in fiscal year 2000. Certain sales periods saw higher income booked using this accounting method, according to the Register. Kumar left CA in June 2004 after an SEC investigation into the company’s accounting irregularities. He was replaced by John Swainson as the company’s CEO.
CA announced in a prepared statement, “We are a dramatically different organization than we were two years ago, when both Mr. Kumar and Mr. Richards left the company,” according to the Register. Kumar and Richards admitted to lying to attorneys and federal investigators in their testimony.
General counsel and senior vice president Stephen Woghin also left the company, as well as their chief financial officer Ira Zar, who left as a result of the accounting fraud. The Register reports that three former senior executives also plead guilty to accounting fraud. Kumar was also found guilty of bribing a vendor to avoid reporting the fraud to authorities.
In a prepared statement, the U.S. Attorney’s Office said that these two presided over a “systemic, company-wide practice of falsely and fraudulently recording and reporting … fiscal quarter revenue.” Sentencing will come on September 12, 2006.
CEO Swainson said in a prepared statement, “Clearly we are disappointed that what would have been a solid year was impacted by execution issues relating to commissions, which adversely affected our fourth quarter performance and led to the restatement of our third quarter results. We are making changes to ensure these problems do not recur, and are confident going forward that our value proposition of helping customers manage and secure their enterprise IT environments is sound.”