Computer Associates' past has come back to haunt it. The Securities & Exchange Commission (SEC) is to pursue a civil suit against the company over historic accountancy practices, and has issued a Wells Notice against CA, the enterprise software vendor said yesterday. The case against is unlikely to reach court: more likely CA will settle with a hefty fine and abject apologies.

The Wells Notice gives CA a last chance to persuade the SEC against taking action. But we cannot envisage how CA can conduct a successful defence, considering how its own internal investigation, completed last year, revealed that the company had booked forward bookings as current revenue. Three officials, including CFO Ira Zar were fired.

CA says the action relates to fiscal 2000. During this time the company booked the entire value of software license as if as current revenue, instead of booking revenues when they were actually received. The upshot was that revenues and profits were inflated. Critics accused the company of deploying this accounting practice to support the personal targets of top management. Charles Wang, Sanjay Kumar and others stood to gain $900 million, a new benchmark for greed even in the dotcom era, as a peRformance bonus.

Following investor pressure, the bonuses were reduced substantially while founder and chairman Charles Wang was sent out to pasture, CA stopped jumping the gun on sales revenue in 2000.

Kumar is now undisputed captain at the helm and he has pledged to run a kinder, gentler CA. He is keen to comply with every best practice in corporate governance that you could think of. And then some. He has one thing to look forward to: no class action. The company settled with investors over the accountancy wheeze in August, 2003. ®