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The former general counsel of Computer Associates, Steven Woghin, pleaded guilty to two counts of conspiracy to commit securities fraud and obstruction of justice Wednesday. The plea before Eastern District Judge I. Leo Glasser followed a $225 million settlement agreement between the Islandia, N.Y.-based software maker and government regulators. The money will go to aggrieved shareholders. The maximum sentence for the two counts totals 25 years and $500,000 in fines. The government also charged former CEO and chairman Sanjay Kumar and Stephen Richards, a top executive, with 10 counts of securities fraud, obstruction of justice and related charges. Computer Associates’ co-founder Charles Wang has not been charged. Woghin is the latest in a line of general counsels charged with criminal wrongdoing. In June, the Eastern District U.S. Attorney’s Office brought charges against Leonard Goldner, general counsel of Long Island-based Symbol Technologies. In July, Tyco International’s former general counsel, Mark Belnick, was found not guilty of grand larceny, securities fraud and falsifying business records. Woghin’s plea followed that of other Computer Associates executives. In April, former executives Ira Zar, David Kaplan and David Rivard pleaded guilty to similar charges. The problems at Computer Associates, among the world’s largest business software developers, resembled that of other corporations caught inflating their earnings to meet ever-demanding Wall Street expectations during the economic boom. To meet these expectations, Computer Associates implemented what the company came to call the “35-day month.” In 1999 and 2000, it booked revenues for fiscal quarters through licensing agreements entered into after the quarter had expired. By stretching the time limit within an individual quarter, Computer Associates improperly recorded $1.75 billion in revenue during its fiscal year overlapping 1999 and 2000. In the quarter between April 1 to June 30, 1999, for instance, the company improperly recognized revenue linked to 22 license agreements. OVERSTATED BY 20 PERCENT The value of these agreements totaled $240 million, or 20 percent of the total revenue reported that quarter, according to government documents. The process continued for three more quarters. The Securities and Exchange Commission began to investigate Computer Associates in 2002, leading the company to tap Wachtell, Lipton, Rosen & Katz to commence an internal investigation. The audit committee then hired Sullivan & Cromwell to launch a second investigation, which was run by partner Robert Giuffra Jr. The findings from this investigation lead the company to restate its financial results from 2000 and 2001 to reflect $2.2 billion in revenue that was improperly booked. Giuffra represented Computer Associates in federal court in Brooklyn Wednesday. The agreement with the company includes a deferred prosecution agreement. An outside monitor will track Computer Associates’ financial reporting for 18 months. If there is no evidence of illegal behavior and it complies with the agreement, it will not be prosecuted as a company. THERE SINCE 1992 Woghin joined the legal department at Computer Associates in 1992, stepping into the general counsel position three years later. Computer Associates brought in Kenneth Handal from Altria after firing Woghin in April. Throughout this period of inflated earnings reports, Woghin supervised in-house lawyers in their negotiations of license agreements improperly recorded in the previous quarter. He believed the purpose of these agreements was to falsely generate revenue for the previous quarter, according to the government. He was also directly involved in drafting a backdated license agreement improperly recorded in a previous quarter, prosecutors said. The government charged Woghin of hiding information from Wachtell during its investigation and presenting false information to the law firm to pass on to federal regulators. The former general counsel also coached employees to hide information during meetings with Wachtell and regulators, said the government. “I hope my cooperation will begin to make amends for the harm I’ve caused,” said Woghin standing alongside his lawyer, Matthew Fishbein, a former federal prosecutor now at Debevoise & Plimpton. Woghin’s sentencing is slated for Dec. 10. In his plea, he agreed to forgo any constitutional arguments questioning the federal sentencing guidelines — a reflection of the Supreme Court’s decision in Blakely v. Washington that threw the validity of the guidelines into doubt.

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