A judge has signed off on a restitution agreement requiring the former chief executive of Computer Associates International to pay at least $52 million - including proceeds from the sale of his yacht and pair of Ferraris - to victims of a huge accounting fraud at one of the world's largest software companies.
U.S. District Judge Leo Glasser approved the deal on Friday following a brief hearing in Brooklyn at which a special master overseeing a restitution fund announced that tens of thousands of people who lost money on the company, now known as CA , would recover only a small fraction of their investments.
The agreement with Sanjay Kumar, who was sentenced to 12 years in prison in November for his role in the scandal, would theoretically make him liable for as much as $798.6 million in payments to investors.
Prosecutors acknowledge, though, that Kumar and his family will probably never have enough money to pay that amount.
The deal, which was filed earlier this month, calls for Kumar to instead make installment payments of $40 million, $10 million and $2 million by December of 2008, then pay 20% of his annual income once he is released from prison.
Those payments would continue for the rest of his life.
Kumar, 45, will be forced to sell off his stock portfolio, a 57-foot yacht in Naples, Fla., and four cars, including the Ferraris. But his family will keep its estate in Upper Brookville, on Long Island.
The agreement "allows his family to live reasonably well," said Kumar's attorney, Lawrence McMichael. "That's fair. They didn't commit a crime."
Kumar, who attended the hearing, left court without speaking to reporters. He must report to prison on Aug. 14.
The $52 million will go into a restitution fund that currently totals about $235 million, said the special master, Kenneth Feinberg. The roughly 95,000 investors who are eligible for restitution will recover only about 2.3% of their loss, he said.
The judge acknowledged that many investors would be disappointed with the payouts. "But that's the nature of the beast," he said.
Kumar pleaded guilty a year ago to obstruction of justice and securities fraud in connection with his actions at the company.
Prosecutors said Kumar plotted to report more than $2 billion in false revenue between 1999 and 2000, and was the architect of an elaborate fraud and cover up that included backdating contracts, lying under oath, and trying to buy the silence of a potential witness.
As part of the deal, the government agreed not to pursue certain assets held by Kumar's relatives. It also waived an $8 million fine that was imposed at sentencing, with the intent of making more money available to fraud victims.
CA, which says it is the fifth largest independent software company in the world based on revenues, now has about 15,000 employees worldwide. It is based in Islandia, on Long Island.