After report, CA and prosecutor mum on Wang

After a special committee at CA released a report on Friday blaming cofounder Charles Wang for accounting fraud there, both the company and the local prosecutor are silent about what happens next.

The Special Litigation Committee's report recommended CA sue Wang for damages and the value of company stock he received. But a CA spokesman on Monday said the company had no comment on what CA's next move will be.

A spokesman for the U.S. Attorney's Office for the Eastern District of New York also had no comment on whether it was pursuing charges against Wang. In April 2006, that office won a guilty plea from former CA CEO Sanjay Kumar on obstruction of justice and securities fraud charges, and Kumar has been sentenced to 12 years in prison and pay more than $1 billion in restitution to stockholders.

Kumar and Stephen Richards, the company's former worldwide sales head, both pleaded guilty after they were accused of fraudulent accounting practices, including falsely reporting hundreds of millions of dollars in revenue for licensing agreements during fiscal quarters in which the deals had not yet been finalized.

The U.S. Attorney's spokesman also declined to comment when asked if there was an ongoing investigation into Wang and accounting fraud at CA, formerly called Computer Associates International.

The statute of limitations for a criminal securities fraud case in U.S. court is five years, and Wang left CA nearly five years ago, in November 2002. The statute of limitations for civil lawsuit alleging fraud in New York state is six years.

But in both cases, prosecutors or CA lawyers may be able to argue that Wang set into motion actions that continued after he left the company, said Norman Berle, a New York criminal defense lawyer who also treats white-collar crime classes at Fordham University's graduate business school.

It seems that "they're likely to go after him and pull him into this mess," Berle said of the CA report on Wang.

While the possibility of a civil lawsuit from CA seems likely, bringing a criminal case may be more complicated, Berle added. The prosecutor will have to weigh the possibility of a conviction and other factors, he said. Wang continues to be a major figure on Long Island as majority owner of the New York Islanders professional hockey team and as a contributor to charities.

"Wang was a really important person in the [IT] industry, and he's a really important person on Long Island," Berle said.

The CA special committee was formed to investigate what it called in its report "a massive accounting fraud" by the company's senior executives as far back as the late 1980s with a cover-up lasting through 2004, according to the report. A major portion of the fraud was the practice of extending fiscal quarters artificially to recognize additional revenue prematurely, the so-called "35-Day month." CA had to restate $2.2 billion in revenue as a result.

The report points to a "profound failure of leadership" and says CA never outgrew a "startup mentality ... that was incompatible with a publicly traded, multibillion dollar, international software enterprise."