U.S. Securities and Exchange Commission
Litigation Release No. 18665 / April 8, 2004
Accounting and Auditing Enforcement Release No. 1988 / April 8, 2004
SEC v. Ira Zar, 04 Civ. 1463 (E.D.N.Y.)(Glasser, I.L.);
SEC v. David Rivard, 04 Civ. 1464 (E.D.N.Y.)(Glasser, I.L.);
SEC v. David Kaplan, 04 Civ. 1465 (E.D.N.Y.)(Glasser, I.L.).
On April 8, 2004, the Securities and Exchange Commission filed three related actions against Ira Zar, the former Chief Financial Officer at Computer Associates International, Inc., ("CA"), and David Rivard and David Kaplan, former vice presidents of finance at CA, charging each defendant with committing accounting fraud while at CA. The Commission's complaints, filed in the United States District Court for the Eastern District of New York, allege that Zar, Rivard, and Kaplan participated in a widespread practice that resulted in the improper recognition of revenue by CA, one of the world's largest software companies. During at least CA's fiscal year 2000, which ran from April 1, 1999 through March 31, 2000 ("FY2000"), CA prematurely recognized revenue from software contracts that had not yet been consummated, in violation of Generally Accepted Accounting Principles ("GAAP"). The Commission's complaints allege that, based on this conduct, Zar, Rivard and Kaplan violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 13b2-1 and 13b2-2 thereunder. The Complaints further allege that Zar, Rivard and Kaplan are also liable for aiding and abetting CA's violations of Sections 10(b), 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder. Without admitting or denying the allegations of the Complaints, Zar, Rivard and Kaplan each consented to a permanent injunction and officer and director bar, as described more fully below.
Specifically, the Commission's complaints allege as follows:
The Commission further alleges that, among other things:
In its lawsuits, the Commission seeks judgments: (a) permanently enjoining Zar, Rivard and Kaplan from violating, and aiding and abetting violations of, the securities laws; (b) requiring Zar, Rivard and Kaplan to disgorge their ill-gotten gains together with prejudgment interest; (c) imposing civil money penalties; and (d) barring Zar, Rivard and Kaplan from acting as officers or directors of any publicly held company.
Concurrently with the filing of the Commission's complaint, Zar, Rivard and Kaplan, without admitting or denying the allegations of the Complaint, each consented to entry of a permanent injunction prohibiting them from violating Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and from aiding and abetting any violations of Sections 10(b), 13(a), 13(b)(2) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1 and 13a-13. They each also consented to a permanent bar from serving as an officer or director of a publicly held company. Litigation against Zar, Rivard, and Kaplan with respect to the Commission's claims of disgorgement and penalties is continuing.
The Commission acknowledges the assistance of the United States Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation in this matter. The Commission's investigation is continuing.
See prior Litigation Release No. 18552.