Sam Wyly Files New Accusations Against CA's Board
Newsday
Tribune Company
October 5 , 2007
Amid intensified legal arguments over who may have authority to pursue financial claims against CA Inc. founder Charles Wang and others, Texas tycoon Sam Wyly in a recent court filing alleged a new litany of improprieties by CA board members.
Lawyers for Wyly in an Aug. 30 filing said "new evidence" not yet in their possession "will implicate CA's board in the fraud and cover-up." The filing mentions an Oct. 20, 2003, meeting at the '21' Club in Manhattan in which a top CA executive, now serving jail time, was allegedly told by a board member to "misrepresent the truth" to federal investigators.
A spokesman for the software company, noting that a federal judge has denied Wyly's court motions, said, "We interpret that as saying the allegations do not have any merit." Wyly's lawyers have filed a notice of appeal, and the new allegations are expected to play a role in the appeal.
Notable among the claims is that former CA chairman Wang "indirectly paid" Alfonse D'Amato through a charitable organization "funded by Wang" while civil litigation over the $2.2-billion accounting scandal at CA was pending. Both were on CA's board at the time.
While the court filings don't name the organization, federal tax filings for the nonprofit group, The Smile Train, show that D'Amato's firm, Park Strategies, was paid $270,000 in fees for "strategic planning" and public relations between June 1999 and July 2003. Park Strategies, which did consulting work for CA after D'Amato left the U.S. Senate in 1999, ended the CA consulting relationship when D'Amato joined the CA board later in 1999.
The Web site for Smile Train, which provides surgery to repair cleft palates and lips of children, primarily in Third World countries, indicates that "all nonprogram expenses" of the organization are paid for by its board members. In most years, only a handful of outside firms have been paid by the organization.
Spokesmen for Wang and CA declined comment. D'Amato was traveling, and his spokeswoman didn't return a phone call.
A long-time CA observer said some of the claims were troubling. "The new reports about transactions with Mr. D'Amato raise very serious questions about the entire board's conduct and certainly need to be investigated," said investment banker Gary Lutin, who has conducted a CA shareholders forum.
Wang has never been criminally charged in the CA case, but a special committee of CA's board in April issued a report alleging his involvement in the fraud and cover-up, and CA has reported its intentions to pursue claims against him. Wang has denied the charges, calling them "fallacious."
Whether CA will get to pursue those claims - and what it says could be up to $500 million in ill-gotten gains - could be decided soon by a federal judge.
For several years, Wyly has alleged that a 2003 shareholder settlement preventing past and current CA officials from being sued for the accounting fraud was itself arrived at through a fraud on the court that approved it. Wyly has sought to invalidate that portion of the settlement releasing the executives from legal liability in the case. CA has disputed Wyly's claims.
But after Wang and former chief financial officer Peter Schwartz declined to settle past claims with the board's special litigation committee, the company found it, too, needed to invalidate some of the settlement releases to pursue claims against the two. (A lawyer for Schwartz also has maintained his innocence.) Federal Judge Thomas Platt, who this summer denied Wyly's request to void the releases, in September also denied the litigation committee's request to "amend or clarify" his order so it could pursue limited claims. Late last month, CA asked the judge to certify its right to pursue the claims. That decision is pending.
In addition to claims that Wang paid D'Amato, the filings by Wyly's Ranger Governance, his Texas-based investment company, also allege, without elaborating, that D'Amato and board member Lewis Ranieri "knew of and directed the cover-up of the fraud at CA."
In addition, the Aug. 30 filing refers to an Oct. 20, 2003, meeting between Ranieri and Stephen Richards, the former CA executive vice president serving a 7-year prison term for fraud and conspiracy charges. Wyly alleges that CA's litigation committee "failed to accurately report" a conversation between the men, in which Ranieri is alleged to have "instructed Richards ... to meet with the SEC and misrepresent the truth in order to continue the cover-up of the fraud at the company."
CA spokesman Dan Kaferle noted that because CA had acknowledged accounting irregularities in a financial statement two weeks before that meeting, Ranieri would have no reason to request that Richards lie.
In addition, he said, "The court has rejected the Wyly arguments. We interpret that as saying the allegations do not have any merit."
