Computer Associates Chief Steps Down

As a federal criminal investigation into securities fraud and obstruction shifts in his direction, Sanjay Kumar, resigned yesterday as Computer Associates’ chairman and chief executive, the New York Times reported.

The fourth-largest independent software company, CA is based in Islandia, NY. With his resignation, Kumar becomes the latest in a string of chief executives to be caught in the crossfire as accounting scandals have rocked U.S. companies. Kumar will be replaced as chairman by Lewis Ranieri, an investment banker and company director, the company said, adding it will soon embark on a search for a new chief executive.

Kumar, a 17-year Computer Associates employee, is not leaving the company entirely. Rather, he will step into the newly created position of chief software architect. The Times reported that he is a prominent Long Island resident and a part owner of the New York Islanders hockey team, along with Charles B. Wang, CA’s former chairman.

The company employs more than 16,000 people and has more than $3 billion in sales, specializing in mainframe utility software designed to ensure the efficiency of large computers used by corporations, the Times reported.

The Securities and Exchange Commission has been conducting a joint investigation of the company for more than two years and four of its former executives have pled guilty to securities fraud or obstruction of justice charges since the beginning of the year.

One of those who pled guilty was former Chief Financial Officer Ira H. Zar, who is cooperating in the investigation. Zar reported directly to Kumar. The Times reported that a plea deal is rarely struck with an executive as highly placed as Zar unless they are helping to make the case against a more senior executive.

Ranieri said in a statement yesterday that the company’s internal investigation had not uncovered wrongdoing by Kumar. "The changes in Sanjay's role are not based on the conclusion that he engaged in any wrongdoing," Ranieri said. "Nonetheless, the conduct in question occurred during his tenure, and the board felt this action was appropriate."

The Times reported that some analysts believe the CA board has not done enough to oversee Kumar.

"Either Mr. Kumar had something to do with the wrongdoing all along, or he is negligent in the most serious way for not knowing that his whole legal department and finance department were busily concocting a criminal act," Nitsan Hargil, a software analyst at Friedman Billings Ramsey, told the Times.

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