Former CA finance executive pleads guilty in audit probe

9 Apr 2004

A former vice president of finance at Computer Associates has pleaded guilty in an audit probe investigation into whether the software giant inflated its revenues in 1998 and 1999.

David Rivard admitted in court to helping backdate contracts worth hundreds of millions of dollars to make the company’s quarterly earnings look higher than they really were.

US prosecutors and the Securities and Exchanges Commission (SEC) have spent over two years investigating whether Computer Associates inflated its revenue by more than US$500m in order to line senior management’s pockets.

According to the Wall Street Journal, former chief financial officer Ira Zar and former senior vice president David Kaplan are also going to plead guilty in the case.

Computer Associates became the first software maker to ring up US$1bn in sales in 1998.

According to Computer Associates, the guilty pleas relate to events that were the subject of a previously announced and continuing independent investigation by the Audit Committee of its accounting practices in 2000. The Audit Committee determined that Computer Associates had prematurely recognised revenue in fiscal 2000 on the basis of software license agreements that were signed in a later quarter. Following this determination, the company requested the resignations of several senior finance executives, including Zar, Kaplan and Rivard.

The revelations pose major legal and commercial difficulties in the months and years ahead for Computer Associates, the company indicated. In a statement it said: “Although the company is unable to predict the scope or outcome of the continuing government investigation, it is possible that it could result in the institution of administrative, civil injunctive or criminal proceedings, including charges against the company and other officers of the company, the imposition of fines and penalties, suspensions or debarments from government contracts, and/or other remedies and sanctions.”

By John Kennedy