Computer Associates Drops on Report of Probe

Computer Associates ( CA) was dropping 9.7% to $22.85 in Instinet premarket trading following reports indicating that federal prosecutors in Brooklyn, N.Y., have opened a probe into whether the company deliberately overstated its earnings.

A report in The New York Times citing people close to the investigation suggests that the company artificially inflated its profits to boost its stock price and enrich its senior executives.

In response to a similar article in Newsday, the company said it hasn't been contacted by authorities regarding an investigation. The company added that it doesn't know what, if anything, is the subject of a probe.

Computer Associates is no stranger to accounting controversy. More than a year ago, the company adopted a pro forma style of presenting its results that executives say was designed to provide more clarity into its financials. Various media outlets and investors have questioned the company's presentations, but Computer Associates executives have repeatedly defended their practices.

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