Ex-Computer Associates CEO Draws 12-Year Sentence
Sanjay Kumar, the once highflying former CEO of Computer Associates International, was sentenced to 12 years in prison today and ordered to pay $8 million in fines and restitution for his part in a massive accounting fraud that came to exemplify the lack of oversight and excess of the Internet-bubble era.
In sentencing Kumar, U.S. District Judge I. Leo Glasser said that Kumar had "been the embodiment of the American dream" but that his downfall had been of his own making. Speaking of the fraud and Kumar's later obstruction of justice, Glasser said that his "cupidity" called for a meaningful sentence and that he must send a message that "the law's reach is long."
The judge's sentence was a departure from federal guidelines, which called for a possible life term. Defense lawyers had sought to paint Kumar's life as one in which he had generally done good. They cited his efforts to bring healthcare access to poor children and to help victims of the deadly 2004 tsunami in Indonesia.
But the lead federal prosecutor on the case, Eric Komitee, responded that while Kumar had done many other good things in his life, it did not take away from the fact that he was responsible for what was "the most brazen, comprehensive obstruction of justice in the modern era of corporate crime." Komitee added that Kumar had repeatedly lied to the government, had directed employees to lie to the government, and had had a witness bribed. He called Kumar's obstruction "elaborate and detailed."
Kumar spoke just prior to being sentenced, saying that he "accept[ed] responsibility" for what he had done. He apologized "for my mistakes and my conduct."
In all, seven top Computer Associates executives have been sentenced for their part in the far-reaching $2.2 billion accounting fraud and coverup, providing a stark reminder to many CEOs of how not to deal with a government investigation in the post-Enron era.
The main fraud, which occurred in 1999 and 2000, was called the "35-day month" scheme because the company would keep its books open past the end of the quarter to realize additional revenue and meet Wall Street expectations. The company also backdated contracts to manipulate sales, witnesses said. One former CA executive, James Wagner, testified under a grant of immunity that backdating was called "the CA way." Although the company entered into a deferred prosecution agreement with the government in 2004 requiring its executives to comply with government investigators to avoid prosecution, several top executives, including Kumar, instead tried to hide evidence and lied to investigators, leading to the obstruction charges against Kumar and others.
Before his fall, Kumar, 44, was a rapidly rising star at CA, now called CA Inc. He was brought into the company in 1987 when CA founder Charles Wang acquired another software maker named Uccel Corp., where Kumar headed software development. Gaining the notice of Wang, Kumar quickly became his prot égé, rising through the ranks as he burnished an image as an aggressive competitor and acute problem solver. In 1994, Kumar was installed as the company's president and chief operating officer. Then in 2000, he rose to chief executive officer, replacing Wang, who stepped down.