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22 2010 financial manipulation words dont lie cgrp 07

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Unformatted text preview: s use these same techniques to evaluate the truthfulness of management? 7 Patricia Sellers, “The Fall of a Wall Street Highflier,” Fortune, Mar. 22, 2010. Financial Manipulation: Words Don’t Lie, CGRP-07 p. 4 Exhibit 1 Interview with Sanjay Kumar, CEO of Computer Associates (April 2001) Bill Griffeth (CNBC): […] Before we get to the specific charges, why do you think these employees would say what they did about your accounting practices? Sanjay Kumar: Well, I mean, you know, I don’t want to play tit for tat with the New York Times, because (unintelligible) somebody who buys paper by the barrel, but let me tell you, there is not a single named employee source in there, there’s not a single Wall Street analyst named in the article. To me that is just incredible that the New York Times, a paper of record, would write a story like this without talking to a single accounting source, and he talks to two customers. […] So I’m not sure where the factual reporting is for the story. Griffeth: And in the big picture, I mean, the charge that you are trying to mask a decline in sales, I mean, when you are saying that revenues are up, I mean it comes at a time when everybody is, you know, falling on hard times, especially for information technology spending. I mean there is nothing wrong in this climate with having a declining sales rate right now. Kumar: Well, you are right, there is nothing wrong with it, and we, like everybody else, are seeing tough economic times. You can refer to our April 16th press release where we talked about the fourth fiscal quarter. We clearly said economic times are tough, but we are doing better. […] Part of the difference here is our new business model. […] If you look at our press release, in the body of the press release is a very clear sentence that says we also signed $1.3 billion of backlog in the quarter that under the new business model will come into revenue in the future. That is $1.3 billion more than reported revenue that we signed. These are committed customer contracts, signed, done, signed, sealed and delivered, that doesn’t come into the [current] period, and to leave that out, I think, is just unfair. Griffeth: But there is a question posed in the article of how much of what you have booked was maintenance business as opposed to actual new software business. Kumar: That’s right, and we said very clearly today that our maintenance numbers conformed to GAAP accounting, our maintenance numbers conform to accounting statements of position of 972 and 989 of a technical pronouncement... Griffeth: With all due respect, Sanjay, you can hide behind GAAP accounting methods. Is there a possibility that it is easy to perhaps confuse maintenance business from new software contracts? Kumar: No, you can’t hide [be...
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