CA May Face SEC ChargesCA May Face SEC Charges

The most successful systems-management company in history has also been under the most suspicion for years. For Computer Associates, that ongoing suspicion could become reality soon.

CA has confirmed receipt of a Securities and Exchange Commission "Wells Notice." The notice, received this week, informed CA that SEC staff involved in lengthy investigations are prepared to recommend civil action by the SEC against the company for its past revenue-recognition policies. CA officials have a chance to respond to the Wells Notice before any legal action is taken.

The charges pertain to conduct at the end of the fiscal year ended March 31, 2000. CA allegedly recorded in the quarter revenue that didn't actually come through until the following fiscal year. CA implemented a new business model later that year, and this past October, an internal audit led CA to report the alleged movement of revenue to the SEC. After the investigation, CA forced out CFO Ira Zar and two top finance executives.

One analyst says the SEC doesn't believe it was just former executives who were responsible--and Sanjay Kumar, now president and CEO of CA, was already a "head honcho" in March 2000. "The SEC action sounds like a witch hunt to me," says Jasmine Noel, an analyst at Ptak Noel Associates. "CA has always been aggressive, and whatever new rules come out, CA will still be aggressive."