Kumar's Prison Term will Wait: Former CA CEO's Sentence is Delayed as Attorneys Negotiate how Many Millions he Must Repay

Newsday
Tribune Company

February 14, 2007

Sanjay Kumar, the former chief executive of Computer Associates who admitted to running a $2.2-billion accounting fraud at the Islandia-based software company, has won a two-month reprieve from starting his prison sentence.

Kumar, 44, was supposed to report to a federal prison Feb. 27. But he won't have to begin serving his 12-year sentence until April 24. The delay will allow his lawyers and federal prosecutors to reach an agreement on the amount of restitution Kumar must pay, according to court papers.

A source familiar with the matter said the restitution Kumar's lawyers were negotiating ranged as high as $50 million.

His lawyer, Lawrence McMichael, didn't return a call yesterday, and spokesmen for CA Inc. and the U.S. attorney's office declined to comment.

The court papers noted one "critical component of the settlement is significant up-front cash payments into the existing restitution fund by Mr. Kumar and his family." The restitution fund is a $225-million fund CA agreed to pay shareholders after it acknowledged accounting misdeeds and reached a deferred prosecution agreement.

In a letter to U.S. District Judge I. Leo Glasser, McMichael wrote that the Kumar cash payments "require the liquidation of certain assets and other similar transactions which Mr. Kumar must accomplish," necessitating a postponement of his surrender date. A restitution hearing on the case is scheduled for April 6.

William Brewer, an attorney for dissident shareholder Sam Wyly, who has pushed hard for restitution, said yesterday he was "gratified to see some action in the case."

Brewer added, however, "We'd like to see the benefits of all this flow a little more directly and efficiently to the people who were harmed," meaning shareholders. He said Wyly looks forward to pursuing the matter directly in civil court.

In November, Glasser sentenced Kumar to 12 years in prison and ordered him to pay an $8-million fine after the former chairman pleaded guilty to eight counts, including securities fraud, conspiracy and obstruction of justice while running Computer Associates, now known as CA Inc.

Kumar's assets, including cars, a yacht and real estate, have been frozen.

Careal Holding AG and Private Capital Management Lp, CA's two largest shareholders, have asked Glasser to turn over proceeds from the sale of Kumar's two Ferraris and his mansion in Oyster Bay.

CA also had obtained an order that Kumar and Stephen Richards, the company's former chief of sales, reimburse the $14.9 million in legal fees the software manufacturer paid. Richards also pleaded guilty to securities fraud, conspiracy and other charges.