Computer Associates 2007 Annual Report Download - page 118

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represented in the three class action lawsuits, including payment of attorneys’ fees.The Company has completed the issuance
of the settlement shares as well as payment of $3.3 million to the plaintiffs’ attorneys in legal fees and related expenses.
In settling the derivative suits, which settlement was also approved by the Federal Court in December 2003, the Company
committed to maintain certain corporate governance practices. Under the settlement, the Company, the individual defendants
and all other current and former officers and directors of the Company were released from any potential claim by stockholders
arising from accounting-related or other public statements made by the Company or its agents from January 1998 through
February 2002 (and from January 1998 through May 2003 in the case of the employee ERISA action). The individual
defendants were released from any potential claim by or on behalf of the Company relating to the same matters.
On October 5, 2004 and December 9, 2004, four purported Company stockholders served motions to vacate the Order of
Final Judgment and Dismissal entered by the Federal Court in December 2003 in connection with the settlement of the
derivative action. These motions primarily seek to void the releases that were granted to the individual defendants under the
settlement. On December 7, 2004, a motion to vacate the Order of Final Judgment and Dismissal entered by the Federal Court
in December 2003 in connection with the settlement of the 1998 and 2002 stockholder lawsuits discussed above was filed by
Sam Wyly and certain related parties.The motion seeks to reopen the settlement to permit the moving stockholders to pursue
individual claims against certain present and former officers of the Company. The motion states that the moving stockholders
do not seek to file claims against the Company. On June 14, 2005, the Federal Court granted movants’ motion to be allowed to
take limited discovery prior to the Federal Court’s ruling on the 60(b) Motions. No hearing date is currently set for the 60(b)
Motions.
On February 1, 2005, the Company established a Special Litigation Committee of independent members of its Board of
Directors to, among other things, control and determine the Company’s response to the 60(b) Motions. The Special Litigation
Committee has announced its conclusions, determinations, recommendations and actions with respect to the 60(b) Motions
(see “— Derivative Actions Filed in 2004” below).
The Government Investigation — DPA Concluded
In September 2004, the Company reached agreements with the United States Attorney’s Office for the Eastern Division of
New York (USAO) and the Northeast Region of the Securities and Exchange Commission (SEC) by entering into a Deferred
Prosecution Agreement (DPA) with the USAO and consenting to the entry of a Final Consent Judgment (Consent Judgment)
in a parallel proceeding brought by the SEC in the United States District Court for the Eastern District of New York (the Federal
Court). The Federal Court approved the DPA on September 22, 2004 and entered the Consent Judgment on September 28,
2004. The agreements resolved USAO and SEC investigations into certain of the Company’s past accounting practices,
including its revenue recognition policies and procedures during certain periods prior to the adoption of the business model in
October 2000, and obstruction of their investigations.
On May 21, 2007, based on the Company’s compliance with the DPA’s terms, the Federal Court ordered dismissal of the
charges that had been filed against the Company in connection with the DPA. As a result of the dismissal and as provided in
the DPA, the DPA thereupon expired and is thus concluded.
The Consent Judgment contains provisions which are parallel to the DPA, and it permanently enjoins the Company from
violating certain provisions of the federal securities laws. The injunctive provisions of the Consent Judgment remain in effect.
For additional information concerning the DPA, the Consent Judgment, and related matters, see discussion below.
The Government Investigation
In 2002, the United States Attorney’s Office for the Eastern District of New York (the USAO) and the staff of the Northeast
Regional Office of the SEC commenced an investigation concerning certain of the Company’s past accounting practices,
including the Company’s revenue recognition procedures in periods prior to the adoption of the Company’s business model in
October 2000.
In response to the investigation, the Board of Directors authorized the Audit Committee (now the Audit and Compliance
Committee) to conduct an independent investigation into the timing of revenue recognition by the Company. On October 8,
2003, the Company reported that the ongoing investigation by the Audit and Compliance Committee had preliminarily found
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