A Thorn With Sticking Power
Sam Wyly Says he has ‘Unfinished Business’ With Former CA Execs

The Dallas Morning News
December 17, 2004

Sam Wyly was oh-so-close, he says, to becoming a Computer Associates International Inc. board member in 2002.

His decision not to join the board, to remain an outside force as an outspoken investor, has led him to where he is today. This year, the Dallas investor has launched a variety of legal tactics to try to force former Computer Associates executives embroiled in an accounting scandal to pay back shareholders.

With no support from the company and little open enthusiasm from other CA investors, Mr. Wyly has persisted in seeking his brand of justice.

The failure of his attempts in 2001 and 2002 to replace CA's board through a proxy challenge hasn't fazed him. Even a legal settlement he signed back in 2002 hasn't stopped him.

“We have unfinished business,” he said.

The offer to join the board came in 2002, when Mr. Wyly was negotiating the settlement to end his campaign to replace CA's board, he said. CA's chief executive at the time, Sanjay Kumar, said Mr. Wyly could take the place of CA co-founder Russell Artzt, Mr. Wyly said.

A CA spokeswoman declined to comment on Mr. Wyly's depiction of the negotiations, and Mr. Kumar could not be reached.

A place on the board would have been a big deal for Mr. Wyly, who leads a group of investors with options to purchase about 3 million CA shares.

That stake came from the $4 billion stock sale to CA of Sterling Software Inc. in 2000. Mr. Wyly cofounded Sterling Software with his brother Charles.

But he declined Mr. Kumar's offer, he said. Joining the CA board would have forced him to stop challenging its decisions as a shareholder. “Plus, I'm picking up the liability for whatever it is they're doing,” he said.

Two years after those negotiations, Mr. Kumar is proclaiming his innocence on charges of securities fraud and obstruction of justice after an accounting scandal. The CA board's internal audit committee found in April that the company had prematurely recognized $2.2 billion in sales in 2000 and 2001.

Court pleas
Mr. Wyly has asked a federal judge in Dallas to determine whether he and his investment group can sue CA's former executives, despite the terms of his settlement with the company, because the executives were using unreliable financial figures during negotiations.

He also has asked a federal judge in New York to reopen a 2003 settlement between CA and shareholders to re-examine the legal arrangements related to officers and directors in that agreement.

Mr. Wyly has also filed a suit on behalf of CA seeking more than $1 billion from the bonuses, salaries and stock-market gains of former CA executives, since that income came during a period of faulty accounting. He does not plan any action against CA itself and does not want to cause the company any harm, he said.

Mr. Wyly, 70, stands to gain financially if he wins, though the prospect of victory seems a long way off. He says he's just as interested in making CA do the right thing - holding executives accountable and maintaining a board of directors that protects shareholders' interests.

“Some really good stuff has already happened,” he said.

He praised the hiring of chief executive-elect John Swainson, an International Business Machines Corp. veteran, and chief financial officer Jeff Clarke, who was chief financial officer of Compaq Computer Corp. before Hewlett-Packard Co. bought it in 2002.

“The value destruction that was going on has been eliminated. Things are better with the removal of the people at the top.”

Freedom to fight
He spent about $15 million on his two proxy battles against CA's board in 2001 and 2002 and got $10 million back in the 2002 settlement with CA. He has since spent millions on legal actions, said his attorney, Bill Brewer of Bickel & Brewer.

Mr. Wyly's net worth is about $990 million, according to Forbes magazine. He has the patience and the money to keep fighting, and he's willing to do it, whether the financial payoff from legal victories or from the stock market comes soon or later, he said.

“That's one blessing I have is freedom,” he said. “I have the liberty to choose what I'm going to work on.”

CA wants nothing to do with Mr. Wyly's suits.

The company avoided criminal prosecution from the Justice Department and settled securities fraud charges from the Securities and Exchange Commission by agreeing in September to a legal purgatory called “deferred prosecution.”

As part of the agreement, CA is helping federal authorities seek ill-gotten gains through their criminal cases against former CA executives. Eventually, CA will be able to apply for some of that money, said company spokeswoman Shannon Lapierre.

“The government, given all of its powers, is going to be the best-suited” to win back money from executives, Ms. Lapierre said. She declined to comment on Mr. Wyly's legal actions.

Fond of rebels
Mr. Wyly is an admirer of rebels and idea men. The Crescent Court offices of Ranger Governance Ltd., his investment group, are filled with portraits of American patriots. A book on Benjamin Franklin rests conspicuously on the receptionist's desk.

Mr. Wyly perceives his legal pursuits as a way of championing shareholders' rights, of reminding corporations that democracy is part of the corporate structure.

He also clearly takes pleasure in the thrill of the legal chase, occasionally bursting into a giddy, highpitched cackle as he describes his legal maneuvers.

With former CA chairman and co-founder Charles Wang and Mr. Kumar gone, Mr. Wyly would like to see a more extensive overhaul of CA's board, which he said is "tainted by the past."

Specifically, he'd like to see Mr. Artzt, the CA co-founder, step down.

Other interests
He wouldn't rule out another proxy challenge, though he said that's not his current intent. And he said he certainly doesn't want to run the company himself.

“I couldn't do it as well. I don't want to work that hard,” he said.

Besides, Mr. Wyly has other things to do. He's the biggest investor in Green Mountain Energy Co., the wind-power provider, and holds a large share of Michaels arts and craft stores. He has 10 grandchildren to keep up with.

And he recently bought a 650-square-foot apartment in Manhattan's West Village, where, as a fervent supporter of President Bush, he delights in taunting his Democratic friends.

The job of being a thorn in the side of CA's former executives isn't very time-consuming, though Mr. Wyly said it's constantly on his mind.

“It's easier now than when I started” with the proxy challenges, he said. “We have the wind in our sails now. It's not David vs. Goliath anymore.”