Updated from 11:23 a.m. EDT

Computer Associates

(CA) - Get Report

on Wednesday pre-emptively stripped Chairman and Chief Executive Sanjay Kumar of his power amid a federal probe into the software company's accounting practices that recently began to focus on him.

Kumar, who was handpicked in August 2000 to succeed company founder Charles Wang, was named to the new position of chief software architect at the Islandia, N.Y., company. He will be succeeded as chairman by board member Lewis Ranieri, founder of the Hyperion Partners investment partnership and a famous Wall Street bond trader. A search for a new CEO is underway.

"We believe the decisions we have made today are fair and responsive to the situation and in the best interests of CA's customers, shareholders and employees," Ranieri was quoted saying in a release. "The audit committee's and the entire board's exhaustive review of these matters resulted in the removal of a number of individuals from the company.

"The changes in Sanjay's role are not based on the conclusion that he engaged in any wrongdoing. Nonetheless, the conduct in question occurred during his tenure, and the board felt this action was appropriate," Ranieri said.

Investors, evidently glad the company was taking action before the government, bid CA's stock up 84 cents, or 3.4%, to $26.41 at midday.

CA's board met Tuesday to weighs Kumar's fate amid a federal probe that this week resulted in the firing of nine people in its legal and finance departments. The company is alleged by prosecutors to have backdated software revenue to make it appear that its previous quarters were up to expectations, primarily during fiscal 2000.

Kumar's fate was thrown into question when Ira Zar, the company's former CFO, pleaded guilty earlier this month to obstruction of justice and fraud in the accounting scandal and agreed to cooperate with prosecutors. David Rivard and David Kaplan, former vice presidents of finance at CA, pleaded guilty to obstruction of justice and securities fraud conspiracy and face a maximum sentence of 10 years in jail.

In announcing Kumar's demotion, Computer Associates noted that the company itself could still face civil or criminal charges in the investigation, which is being conducted by the

Securities and Exchange Commission

and a U.S. attorney's office in New York.