New Zealander involved in billion dollar scam in the US

NEW YORK - A New Zealander has been released on US$5 million ($7.98 million) bail and warned he could be deported after pleading guilty to charges relating to a billion dollar scam in the United States.

Stephen Richards, 41, pleaded guilty to securities fraud, perjury and obstruction of justice charges related to his role in a US$2.2 billion accounting scheme at the computer software company Computer Associates International Inc.

Richards appeared before Judge Leo Glasser in a US District Court in Brooklyn on Monday and was warned he could be deported. He was the former head of sales at the company.

Richards ran CA's New Zealand operation in the 1990s before climbing through the company ranks, via its Australian operations.

Sanjay Kumar, the former chief executive of CA Inc., also pleaded guilty to the same charges.

Kumar, who left CA Inc., as it was known, in June 2004, improperly booked software license revenue from 1999 to 2000 in order to meet Wall Street analysts' quarterly earnings expectations and then lied to investigators about it, according to the indictment.

In one instance, prosecutors charged that Kumar paid off a customer who threatened to tell the government about a bogus software deal. The payoff of US$3.7 million was made while Kumar knew an investigation was pending against the company.

"The guilty pleas today of Computers Associates' former CEO and its former head of world-wide sales are the culmination of the government's successful investigation into a culture of corruption and fraud at Computer Associates," Roslynn Mauskopf, US Attorney for the Eastern District of New York, said in a statement.

The men, who initially pleaded not guilty in September 2004, had been scheduled to go on trail on May 8. Prosectors would not comment on why the men changed their plea, but noted another ex-CA executive, Tommy Bennett, was arrested and charged on Friday for his role in the scheme.

"I know my conduct was wrong ... I apologise for my actions," Kumar, who was dressed in a dark suit and stood with his hands behind his back, told the court at the hearing that lasted more than two hours.

Kumar, 44, and Richards both left the courtroom without commenting on their pleas. The charges in the nine-count indictment against them range from conspiracy to commit securities fraud, conspiracy to obstruct justice, to obstruction of justice.

As part of the scheme, Kumar and other sales executives back-dated software license contracts so that revenue would be recorded in a quarter where extra sales were needed to help the Islandia, New York, based company to meet or exceed Wall Street estimates, the indictment said.

In one instance, Kumar flew in the company jet to Paris where he personally negotiated a license agreement for US$32 million. That contract was backdated to make it appears that it had been finalised and signed on June 30, 1999, the government said.

Each count in the indictment carries a maximum sentence ranging from 5 to 20 years. Sentencing was set for September 12.

CA, a developer of business software, restated its results for fiscal 2001 through 2004 after Kumar left the company in 2004. It also installed new management, renamed the company and reduced its workforce.

Both men remain free on US$5 million bond and have surrendered their passports.

In 2004, CA agreed to pay US$225 million in shareholder restitution and continues to co-operate with the government as part of a deferred prosecution agreement.

CA shares closed down 25 cents, or around 1 per cent, at US$25.51 in Monday trading on the New York Stock Exchange. The stock is down 10 per cent so far this year versus a five per cent rise on the S&P 500 index.

- REUTERS