Cleanup Firm Sets Sights on Computer Associates

Although the amount of money involved in the clawback is not huge, it has become a symbol of a company that can't quite clean itself up, said Gary Lutin, an investment banker and shareholder rights advocate. "You have a company trading at about a 50% discount to its peers, and much of that discount is attributable to the corporate integrity issue and ongoing legal risk. Correcting those should result in a substantial increase in shareholder value, and that is what this is all about," he said during an interview.

The risk Lutin refers to are ongoing negotiations with the U.S. Department of Justice and the Securities and Exchange Commission to finally settle the accounting scandal. Earlier this year, CA put aside $10 million as what the company called "an initial offer" to the government. However, some analysts think an eventual fine could be many times larger. And on Monday, The Wall Street Journal reported that talks with the government are very close to settlement, and that the company could face "deferred prosecution," essentially a form of probation that could leave the company open to prosecution in the future.

CA management hopes to pay a fine and avoid criminal prosecution of the company, a move that would disqualify it from competing for government contracts. A CA spokeswoman said the discussions with the government are ongoing "and we hope to resolve them shortly."

Also ongoing are discussions about the bonus issue, but there is as yet no timetable for their conclusion, she said.

Lutin, meanwhile, has organized an ongoing shareholders forum to give CA investors an opportunity to ask questions, share information and act as a pressure group. And shareholders at other companies are also moving to reclaim "unearned" bonus money.

CA's valuation is tough to peg accurately right now because of the major shift in the company's business model, several analysts have noted recently. But nearly every note about the company refers to the "overhang" from the scandal. Removing it will be a major step forward for Computer Associates -- and its investors.

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