THE INDUCTEES: Sanjay Kumar

THE CON: As CEO of Computer Associates, Sanjay Kumar favored the “35-day month” accounting system. By cooking the books and backdating contracts, Kumar took home as much as $330 million in stock bonuses.

THE DAMAGE: $2.2 billion

THE OUTCOME: Computer Associates changed its name to CA Inc. Kumar was sentenced to 12 years in prison and ordered to turn over most of assets, or about $52 million; that’s just a drop in the bucket of a gigantic $800 million restitution fund.

Software CEO with his own accounting style

Sanjay Kumar had a foolproof formula for success: the “35-day month.” To bump up revenues and stock prices, Kumar simply tacked on an extra week to a financial reporting period. Through these and other tricks, Kumar became a wealthy man and grew Computer Associates into a major player with 15,000 employees worldwide. But cooking the books only works for so long; in spite of Kumar's efforts to destroy evidence and lie to investigators, his $2.2 billion fraud was exposed. In 2006, he was sentenced to 12 years in federal prison.

The son of immigrants who fled Sri Lanka when he was a child, Kumar worked his way up the corporate ladder at Computer Associates. Kumar become CEO of the software company in 2000 and sealed the deal by partnering with the company's founder to buy the New York Islanders hockey team. He was flying high – enjoying the fruits of the enormous $330 million stock bonus he took home in 1998.

Kumar's bank account wasn't the only site of a growth spurt. Computer Associates – the second largest maker of mainframe computer software – reported $6 billion in sales in 2000. But there was a reason the numbers looked terrific.  In fact, deceit was so commonplace at the company that employees had shorthand names for the ways in which they cooked the books. Along with the “35-day month,” there was a technique known as “cleaning up” that was much less innocent than it sounded. In a classic example of cleaning up, Kumar made a $32 million software deal in 1999; he then backdated the contract to assign more than half the funds as revenue on the quarter that had already closed.

The audacity behind this con – evident in the calm reworking of a calendar  – was matched by Kumar's response to scrutiny. In 2004, he stepped down as chairman as a formal investigation was launched. When company lawyers asked him to preserve data on his computer, he wiped the hard drive. He lied repeatedly to investigators and even shelled out $3.7 million to buy the silence of an associate who threatened to talk.

Two years later, Kumar and seven other executives were indicted on securities fraud and obstruction of justice. Kumar pleaded guilty and was sentenced to 12 years in prison and an $8 million fine in 2006. Later, he was ordered to pay a staggering $800 million in restitution; to date, he has paid $52 million, or the majority of his assets, over two years.  

Computer Associates, which was forced to instate stricter internal controls and hire an independent monitor for two years, paid a $225 million fine to shareholders. The company changed its name to CA Inc. and replaced its entire upper management team and board.

Sanjay Kumar

Con Timeline: 2000-2004

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