Computer Associates 2005 Annual Report Download - page 130

Table of Contents
Note 7 — Commitments and Contingencies (Continued)
practices for the recognition of software license revenue, its ethics and compliance policies and other matters. The Independent
Examiner will also review the Company’ s compliance with the DPA and will report findings and recommendations to the USAO, SEC
and Board of Directors within six months after appointment and quarterly thereafter. On March 16, 2005, the Federal Court appointed
Lee S. Richards III, Esq. of Richards Spears Kibbe & Orbe LLP, to serve as Independent Examiner. Mr. Richards will serve for a term of
18 months after appointment under conditions specified in the DPA. Mr. Richards’ term of service is subject to extension by the USAO
and SEC.
Pursuant to the DPA, the USAO will defer and subsequently dismiss prosecution of a two-count information filed against the Company
charging it with committing securities fraud and obstruction of justice if the Company abides by the terms of the DPA, which currently
is set to expire within 30 days after the Independent Examiner’ s term of engagement is completed. In certain circumstances the term of
the DPA may be extended. Pursuant to the Final Consent Judgment with the SEC, the Company is permanently enjoined from violating
Section 17(a) of the Securities Act of 1933 (the Securities Act), Sections 10(b), 13(a) and 13(b)(2) of the Securities Exchange Act of
1934 (the Exchange Act) and Rules 10b-5, 12b-20, 13a-1 and 13a-13 under the Exchange Act. Pursuant to the DPA, the Company has
also agreed to comply in the future with federal criminal laws, including securities laws. In addition, the Company has agreed not to
make any public statement, in litigation or otherwise, contradicting its acceptance of responsibility for the accounting and other matters
that are the subject of the investigations, or the related allegations by the USAO, as set forth in the DPA.
Under the DPA and the Final Consent Judgment, the Company also is required to cooperate fully with the USAO and SEC concerning
their ongoing investigations into the misconduct of any present or former employees of the Company. The Company has also agreed to
fully support efforts by the USAO and SEC to obtain disgorgement of compensation from any present or former officer of the Company
who engaged in any improper conduct while employed at the Company.
After the Independent Examiner’ s term expires, the USAO will seek to dismiss its charges against the Company. However, the Company
shall be subject to prosecution at any time if the USAO determines that the Company has deliberately given materially false, incomplete
or misleading information pursuant to the DPA, has committed any federal crime after the date of the DPA or has knowingly,
intentionally and materially violated any provision of the DPA (including any of those described above). Also, as indicated above, the
USAO and SEC may require that the term of the DPA be extended beyond 18 months.
Also on September 22, 2004, Steven Woghin, the Company’ s former General Counsel, pled guilty to conspiracy to commit securities
fraud and obstruction of justice under a two-count information filed against him by the USAO. The SEC also filed a complaint against
Mr. Woghin alleging that he violated Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and
Rules 10b-5 and 13b2-1 thereunder. The complaint further alleged that under Section 20(e) of the Exchange Act, Mr. Woghin aided and
abetted the Company’ s violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20,
13a-1 and 13a-13 thereunder. Mr. Woghin consented to a partial judgment imposing a permanent injunction against him from
committing such violations in the future and a permanent bar from being an officer or director of a public company. The SEC’ s claims
for disgorgement and civil penalties against Mr. Woghin are pending.
Additionally on September 22, 2004, the SEC filed complaints against Sanjay Kumar and Stephen Richards alleging that they violated
Section 17(a) of the Securities Act, Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder. The
complaints further alleged that under Section 20(e) of the Exchange Act, Messrs. Kumar and Richards aided and abetted the Company’ s
violations of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13
thereunder.
On September 23, 2004, the USAO filed a ten-count indictment charging Messrs. Kumar and Richards with conspiracy to commit
securities fraud and wire fraud, committing securities fraud, filing false SEC filings, conspiracy to obstruct justice and obstruction of
justice. Additionally, Mr. Kumar was charged with one count of making false statements to an agent of the Federal Bureau of
Investigation and Mr. Richards was charged with one count of perjury in connection with sworn testimony before the SEC.
The Company continues to cooperate with the USAO and the staff of the SEC in connection with their ongoing investigation of
individuals who were involved in the Company’ s past improprieties. The Company’ s Board of Directors is continuing to review the
matter of compensation paid or due to individuals subject to the investigation, and possibly other persons. The Board intends to take such
action as it deems in the best interests of the Company and its stockholders in relation to such compensation.
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