CA Turns Against Its Founder
Imagine if Microsoft turned against Bill Gates or Oracle turned against Larry Ellison. That’s the scenario unfolding on Long Island this weekend, as CA Inc. (formerly Computer Associates) alleges its founder and former chairman Charles Wang took part in accounting fraud at the company.
Until now, Wang’s former right-hand man–former CA CEO Sanjay Kumar–had taken most of the heat for the accounting scandal from earlier this decade. But CA finally appears ready to play hardball with Wang, who is no longer associated with the company.
Talk about strange timing. The VAR Guy was on the phone with CA representatives on April 13, discussing a completely different subject. During the quick chat, The VAR Guy noted that CA had been unusually quiet in recent months. No big executive departures (unlike the revolving door of 2006). No shareholder battles. Just lots of planning for the April 22 CA World conference in Las Vegas. Finally, CA was focused on customers instead of controversy.
And then all this news breaks later in the day. First, Kumar agreed to pay nearly $800 million over his lifetime to victims of the accounting fraud. Then a special committee on CA’s board also pointed a finger of blame at Wang. Fortunately, neither event should imact CA’s customer focus since CA itself isn’t on the hot seat.
Long Island’s daily newspaper, Newsday, has followed Kumar’s legal troubles closely. But the newspaper rarely, if ever, speculated about Wang’s possible involvement in accounting problems that plagued CA. Wang left the company in 2002, and Kumar was later found to have cooked CA’s books.
But were there two cooks in the kitchen? Wang says no way.
Ironically, all this controversy could be exactly what CA needs as it prepares for CA World. Fortune Magazine in 2006 called CA the most dysfunctional company in America. Current CA management has a chance to prove that change truly is under way.
Is anyone at all surprised by this?
[…] for lots of noise about CA and former CEO Charles Wang. The company late April 14 alleged that Wang engaged in accounting fraud while leading the company. Most of the mainstream press has yet to cover the showdown since […]
No surprise – common sense dictates, it was only a matter of time until the investigators caught up with the man at the top, but foolish people, including customers, investors and Long Islanders at large just didn’t want to see it.
What does it mean for customers..
Is it even remotely possible that CA can invest in Ramp;D, world class product development and support if they have a 10B deficit to overcome? What will the future look like – will they carve up the company, drop lesser performing product lines, can they sell into the SMSamp;P, with its higher cost of sale and demand on a vital partner channel?
For Shareholders –
Lawsuits, oversight committees, investigations, huge scale audits and a continued loss in shareholder value, will make the stock a dog for a very long time, allowing the raiders who’ve targets CA for years to acquire control at bargain basement costs. I suspect both individual and institutional investors will pull their positions based on uncertainty and ethics. The company’s ability to leverage the financial markets for sustainability and growth will be at risk.
For Long Islanders – .
For folks outside the technical or investment communities, the impact won’t be felt immediately, but it will have both economic and socio/psycho effects. Wang has been considered a “power broker” by the politicians and local media. His real estate investments, charitable contributions, investments in the NHL Islanders and AF Dragons, plus his long time show of support by starting and building his enterprise on LI gives him household recognition. Many regular people respect Charles and feel a personal connection, even if only through a sports team connection. I’m certain both Wang’s uniformed and highly paid supporters will make every attempt to raise him to “martyr” status. I could see campaigns like “Support LI buy CA” on the side of county vehicles.
Many years ago, CA invented the “Hockey-Stick” growth curve for tech firms – you have to wonder what the down-slide will look like!
[…] by former CEO Sanjay Kumar. Now, CA alleges that former Chairman and Co-founder Charles Wang was involved in the fraud. How did CA and Wang reach this showdown? Here#8217;s a look at 15 defining moments that changed […]