Computer Associates 2010 Annual Report Download - page 86

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(1) contribution towards the consideration the Company had previously agreed to provide then current and former
stockholders in settlement of certain class action litigation commenced against the Company and certain officers and
directors in 1998 and 2002, (2) compensatory and consequential damages in an amount not less than $500 million in
connection with the investigations giving rise to the Deferred Prosecution Agreement (DPA) entered into between the
Company and the United States Attorney’s Office (USAO) in 2004 and a consent to enter into a final judgment (Consent
Judgment) in a parallel proceeding brought by the SEC regarding certain of the Company’s past accounting practices,
including its revenue recognition policies and procedures during certain periods prior to the adoption of the Company’s new
business model in October 2000. (In May 2007, based upon the Company’s compliance with the terms of the DPA, the
Federal Court ordered dismissal of the charges that had been filed against the Company in connection with the DPA, and the
DPA expired. The injunctive provisions of the Consent Judgment permanently enjoining the Company from violating certain
provisions of the federal securities laws remain in effect.), (3) unspecified relief for violations of Section 14(a) of the Exchange
Act for alleged false and material misstatements made in the Company’s proxy statements issued in 2002 and 2003,
(4) relief for alleged breach of fiduciary duty, (5) unspecified compensatory, consequential and punitive damages based upon
allegations of corporate waste and fraud, (6) unspecified damages for breach of duty of reasonable care, (7) restitution and
rescission of the compensation earned under the Company’s executive compensation plan and (8) pursuant to Section 304 of
the Sarbanes-Oxley Act, reimbursement of bonus or other incentive-based equity compensation and alleged profits realized
from sales of securities issued by the Company. Although no relief is sought from the Company, the Consolidated Complaint
seeks monetary damages, both compensatory and consequential, from the other defendants, including current or former
employees and/or directors of the Company, Ernst & Young LLP and KPMG LLP in an amount totaling not less than
$500 million.
On February 1, 2005, the Company established a Special Litigation Committee of members of its Board of Directors who are
independent of the defendants to, among other things, control and determine the Company’s response to the Derivative
Action. On April 13, 2007, the Special Litigation Committee issued its reports, which announced the Special Litigation
Committee’s conclusions, determinations, recommendations and actions with respect to the claims asserted in the Derivative
Action. The Special Litigation Committee also served a motion which seeks to dismiss and realign the claims and parties in
accordance with the Special Litigation Committee’s recommendations. As summarized below, the Special Litigation Committee
concluded as follows:
•The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of
the claims against Messrs. Wang and Schwartz.
•The Special Litigation Committee has concluded that it would be in the best interests of the Company to pursue certain of
the claims against the former Company executives who have pled guilty to various charges of securities fraud and/or
obstruction of justice — including Messrs. Kaplan, Richards, Rivard, Silverstein, Woghin and Zar. The Special Litigation
Committee has determined and directed that these claims be pursued by the Company using counsel retained by the
Company, unless the Special Litigation Committee is able to successfully conclude its ongoing settlement negotiations with
these individuals.
•The Special Litigation Committee has reached a settlement (subject to court approval) with Messrs. Kumar, McWade and
Artzt.
•The Special Litigation Committee believes that the claims against current and former Company directors Messrs. Cron,
D’Amato, de Vogel, Fernandes, Grasso, La Blanc, Lorsch, Pieper, Ranieri, Schuetze, et. al. should be dismissed. The Special
Litigation Committee has concluded that these directors did not breach their fiduciary duties and the claims against them
lack merit.
•The Special Litigation Committee has concluded that it would be in the best interests of the Company to seek dismissal of
the claims against Ernst & Young LLP, KPMG LLP and Mr. McElroy.
By letter dated July 19, 2007, counsel for the Special Litigation Committee advised the Federal Court that the Special
Litigation Committee had reached a settlement of the Derivative Action with two of the three derivative plaintiffs —
Bert Vladimir and Irving Rosenzweig. In connection with the settlement, both of these plaintiffs have agreed to support the
Special Litigation Committee’s motion to dismiss and to realign. The Company has agreed to pay the attorney’s fees of
Messrs. Vladimir and Rosenzweig in an amount up to $525,000 each. If finalized, this settlement would require approval of
the Federal Court. On July 23, 2007, Ranger filed a letter with the Federal Court objecting to the proposed settlement. On
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