Software giant Computer Associates (CA) admitted today that one of its former executives has pleaded guilty to charges of conspiracy to obstruct justice in an ongoing financial fraud investigation.
Lloyd Silverstein, who was senior vice president of finance, admitted the charges in connection with a joint investigation by the US Attorney's Office and US regulator the Securities and Exchange Commission (SEC), which is focusing on "CA's past revenue recognition practices".
CA conceded that the investigation was likely to be far-reaching.
"As previously reported, the company is unable to predict the scope, the timing or the outcome of the government investigation," the firm said in a statement.
"But it could result in the commencement of administrative, civil injunctive and criminal proceedings, including the imposition of penalties and other remedies."
The investigation came after an independent investigation by CA's Audit Committee discovered evidence that the company had "prematurely recognised revenue" in its 2000 fiscal year.
As a result, it demanded the resignation of Silverstein and two other executives in October 2003. It has now also handed over evidence to government investigators that "reflected such improper revenue recognition" and directly linked in Silverstein.
Counsel for CA, Wachtell, Lipton, Rosen & Katz, also told government investigators that Silverstein had lied when he denied the existence of this practice during an interview in August 2002.
"The Audit Committee and the company are continuing their efforts to co-operate with the government's ongoing investigation, and are committed to resolving these problems and putting these matters to rest," said the statement.
CA confirmed last week that it is likely to face civil action by US regulators on charges of having falsely inflated its accounts.
The SEC sent the firm a 'Wells Notice', effectively giving it one last chance to settle before formal charges are filed.
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