Two Admit to Securities Fraud

Sanjay Kumar, the former chief executive of Computer Associates International Inc., and another former executive pleaded guilty Monday to obstruction of justice and securities fraud charges in a massive accounting scandal at the business software company.

Kumar and Stephen Richards, former head of worldwide sales, had been accused in a 2004 indictment of engaging in a widespread scheme to falsely inflate the company’s quarterly earnings by backdating contracts.

According to the indictment, Kumar was so involved with adding revenue to a financial quarter even after it closed that he flew to Paris in July 1999 to finalize a deal and personally signed a contract that had been backdated.

The indictment also charged that executives instructed salespeople to complete deals after the quarter had closed and “cleaned up” contracts by removing time stamps from faxes.

“Your honor, my conduct was wrong. I take responsibility for participating in this practice and I apologize for my actions,” Kumar told the judge, referring to the accounting fraud.

Richards pleaded guilty to the same charges in federal court in Brooklyn.

Both remain free on $5 million bond while awaiting their Sept. 12 sentencing. The law allows a maximum sentence of 20 years in prison for the offenses, but the term could be substantially less under federal sentencing guidelines.

Kumar is also a co-owner of the New York Islanders hockey team.

Computer Associates, which makes software and storage systems for large corporations, agreed in 2004 to pay $225 million to shareholders in a settlement that allowed it to defer criminal prosecution.

The Islandia, N.Y.-based company restated its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked.

During the company’s fiscal year 2000, Computer Associates “prematurely recognized” more than $1.4 billion in revenue from at least 116 contracts that had not yet been signed, the Securities and Exchange Commission said.