Computer Associates 2007 Annual Report Download - page 124

•The Special Litigation Committee has concluded that it would be in the best interests of the Company to seek dismissal of
the claims against CA’s former independent auditors, Ernst & Young LLP (“E&Y”). The Special Litigation Committee has
recommended this dismissal in light of the relevant legal standards, in particular, the applicable statutes of limitation.
However, the Special Litigation Committee has recommended that CA promptly sever all economic arrangements with
E&Y.
•The Special Litigation Committee has concluded that it would be in the best interests of the Company to seek dismissal of
the claims against CA’s current independent auditors, KPMG LLP (“KPMG”). The Special Litigation Committee has
determined that KPMG’s audits were professionally conducted. The Special Litigation Committee has recommended this
dismissal in the exercise of its business judgment in light of legal and factual hurdles as well as the value of the Company’s
business relationship with KPMG.
The Special Litigation Committee has served motions which seek dismissal of the Director Claims and the McElroy Claims.
The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted
by Delaware law. As a part of that obligation, the Company has advanced and will continue to advance certain attorneys’ fees
and expenses incurred by current and former officers and directors in various litigations and investigations arising out of
similar allegations, including the litigation described above.
Derivative Actions Filed in 2006
On August 10, 2006, a purported derivative action was filed in the Federal Court by Charles Federman against certain current
or former directors of the Company (the 2006 Federman Action). On September 15, 2006, a purported derivative action was
filed in the Federal Court by Bert Vladimir and Irving Rosenzweig against certain current or former directors of the Company
(the 2006 Vladimir Action). By order dated October 26, 2006, the Federal Court ordered the 2006 Federman Action and the
2006 Vladimir Action consolidated. Under the order, the actions are now captioned “CA, Inc. Shareholders’ Derivative
Litigation Employee Option Action”. On January 31, 2007, plaintiffs filed a consolidated amended complaint naming as
defendants the following current or former directors of the Company: Messrs. Artzt, Cron, D’Amato, de Vogel, Fernandes,
Goldstein, Grasso, Kumar, La Blanc, Lofgren, Lorsch, McCracken, Pieper, Ranieri, Schuetze, Swainson, Wang, and Zambonini
and Ms. Unger. The Company is named as a nominal defendant.The complaint alleges purported claims against the individual
defendants for breach of fiduciary duty and for violations of Section 14(a) of the Exchange Act for alleged false and material
misstatements made in the Company’s proxy statements issued from 1998 through 2005. The premises for these purported
claims concern the disclosures made by the Company in its Annual Report on Form 10-K for the fiscal year ended March 31,
2006 concerning the Company’s restatement of prior fiscal periods to reflect additional (a) non-cash, stock-based
compensation expense relating to employee stock option grants prior to the Company’s fiscal year 2002, (b) subscription
revenue relating to the early renewal of certain license agreements, and (c) sales commission expense that should have been
recorded in the third quarter of the Company’s fiscal year 2006. According to the complaint, certain of the individual
defendants’ actions allegedly were “in violation of the spirit, if not the letter of the DPA.” The complaint seeks an unspecified
amount of compensatory and punitive damages, equitable relief including an order rescinding certain stock option awards, an
award of plaintiffs’ costs and expenses, including reasonable attorneys’ fees, and other unspecified damages allegedly
sustained by the Company. On March 30, 2007, the Company and the individual director-defendants separately moved to
dismiss the complaint. In the opinion of management, the resolution of this lawsuit is not expected to have a material adverse
effect on the Company’s financial position, results of operations, or cash flows.
On September 13, 2006, a purported derivative action was filed in the Delaware Chancery Court by Muriel Kaufman asserting
purported derivative claims against Messrs. Kumar, Wang, Zar, Silverstein, Woghin, Richards, Artzt, Cron, D’Amato, La Blanc,
Ranieri, Lorsch, Schuetze,Vieux, De Vogel and Grasso, and Ms. Strum Kenny. The Company is named as a nominal defendant.
The complaint alleges purported claims against the individual defendants for breach of fiduciary duty, corporate waste and
contribution and indemnification, in connection with the accounting fraud and obstruction of justice that led to the criminal
prosecution of certain former officials of the Company and to the DPA (see “— The Government Investigation” above) and in
connection with the settlement of certain class action and derivative lawsuits (see “— Stockholder Class Action and
Derivative Lawsuits Filed Prior to 2004” above). The complaint seeks an unspecified amount of compensatory damages, an
accounting from each individual defendant, an award of plaintiff’s costs and expenses, including reasonable attorneys’ fees,
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