Software giant Computer Associates (CA) has confirmed that it is likely to face civil action by US regulators on charges of having falsely inflated its accounts.
US regulator the Securities and Exchange Commission (SEC) has sent CA a 'Wells Notice', effectively giving the company one last chance to settle before the formal charges are filed.
The SEC has been jointly investigating CA's statements of results for the financial year ending 31 March 2001 in conjunction with the US District Attorney's office in New York.
In a statement, CA said it had been "responding to a joint investigation" concerning accounting practices "that were in place prior to CA's adoption of its new business model in October 2000".
The investigation is also thought to be examining whether results were inflated to boost executive bonuses, although this has not been confirmed by the regulator or CA.
Until October 2000, CA booked revenue from software contracts upfront rather than over the lifetime of the contract.
Last October, an independent audit committee set up by the company characterised this practice as 'prematurely' booking revenues, triggering the departure of chief financial officer Ira Zar and two of his staff.
CA founder Charles Wang, whose $550m stock bonus angered shareholders, stepped down as chairman in November 2002. The firm settled a suit brought by shareholders over its accounting last August.
In April 2001 the company reported annual profits of around $230m for the year ending March 2001, only to revise the figure to around $90m the following month.
The previous year, CA admitted that its stated annual revenue of $2.13bn was incorrect as it had counted some contracts twice. The actual figure was $1.91bn.
Former employees have alleged to The New York Times that CA engaged in questionable accounting practices throughout the late 1990s as it sought to show organic growth rather than having bought revenues through acquisitions.
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