Controversies
CA has been party to a number of lawsuits over its thirty-plus year history, and particularly so during the period from the early 1990s to early 2000s. One of the higher-profile disputes was a 1992 suit by Electronic Data Systems (EDS), which was a CA customer. EDS accused CA of breach of contract, including misuse of copyright, and violations of anti-trust laws. CA filed a counter-claim, also alleging breach of contract, including copyright infringement and misappropriation of trade secrets. The companies reached a settlement in 1996. Meanwhile, a hostile (and unsuccessful) takeover bid by CA in 1998 for computer consulting firm Computer Sciences Corporation (CSC) prompted a bribery suit by CSC’s (then) chairman Van Honeycutt against CA’s founder and (then) CEO, Charles Wang.
Further controversy followed in 1999 when Wang received the largest bonus in history at that time from a public company. Moreover, this receipt (a $670 million stock grant that dated to the vesting of a 1995 stock option) occurred while the company faced a slowdown in European markets and an economic slump in Asia, both of which had affected CA's earnings and stock price. In total, the company took a $675 million after-tax charge for $1.1 billion in payouts to Wang and other top CA executives.
In 2000 a shareholder-based class-action lawsuit accused CA of misstating more than $500 million in revenue in its 1998 and 1999 fiscal years in order to artificially inflate its stock price. An investigation by the Securities and Exchange Commission (SEC) also followed, which resulted in charges against the company and some of its former top executives. The SEC alleged that from 1998 to 2000, CA routinely kept its books open to include quarterly revenue from contracts executed after the quarter ended in order to meet Wall Street analysts’ expectations. The company reached a settlement with the SEC and Department of Justice in 2004, agreeing to pay $225 million in restitution to shareholders and to reform its corporate governance and financial accounting controls. Eight CA executives since pleaded guilty to fraud charges – most notably, former CEO and chairman Sanjay Kumar, who received a 12-year prison sentence for orchestrating the scandal. The company subsequently made sweeping changes through virtually all of its senior leadership positions.
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