Better-Scrubbed Hands Needed to Clean up FalconStor Mess

Don Tennant

In my Nov. 14 post, "Suicide Victim's Successor Hires Former CA Exec in Wake of Bribery Scandal," I wrote about FalconStor having brought in Bryan Urquhart to take over as CFO following the bribery mess that's still under investigation, and that led to the suicide of former FalconStor CEO ReiJane Huai. I had questions about that move then, and I have even more now.


In that post, I noted that Urquhart had served as senior vice president of finance and administration at CA from March 2000 to January 2007. I also noted that the Securities and Exchange Commission had determined that CA had engaged in accounting fraud during the period from at least Jan. 1, 1998, through Sept. 30, 2000, meaning that there was at least a six-month overlap of the accounting fraud with Urquhart's service as SVP of finance and administration. So I raised some questions that I thought warranted answers:

Now, let's be charitable and assume Urquhart knew nothing about the accounting fraud that was being carried out right under his nose. Why didn't he know about it?


More to the point, why would FalconStor bring in someone with those credentials to take over as CFO following a massive bribery scandal? And why does there appear to be a connection between FalconStor and the CA good-old-boy network? Wouldn't FalconStor have been better advised to distance itself from that crowd?

That grabbed Urquhart's attention. Later the same day, he contributed this comment to the post:

Though it is not FalconStor's policy to respond to every misstatement made about the company, I feel compelled to comment on your blog since it questions my personal integrity. I was the CFO for a division of a company that CA acquired in March 2000 (Sterling Software) and was still in that role for approximately the next year after the acquisition, until March 2001. I was not involved in the SEC investigation and was never asked to speak with any agency, as there was no reason for me to do so. So there is no real basis for your conjecture. After the Sterling Software integration was compete, I stayed with CA for six years as part of a new regime-and the company specifically asked me to help implement the new, transparent, and open culture and organization. I believe this answers all of the questions you raise.

I posted this comment in reply:

To the contrary, what you're saying here raises several more questions. I'll email my questions to you directly.

I did just that the same day. Here's what I wrote:

According to your LinkedIn profile, you were SVP, Finance and Administration for CA from March 2000 to January 2007. Are you saying that you were not actually in that position from March 2000 to March 2001?


[Former CA CEO] Sanjay [Kumar] was still in denial mode well after March 2001. When he was denying the fraud while still at the company for the next three years or so, that was hardly a "new regime." What am I missing?

Urquhart responded to my email the same day:

I had several roles during my tenure at CA, and the generic title covering that entire period is SVP Finance and Administration. During the period from March 2000 to April 2001, I was still acting as CFO for a division of the business CA had acquired and I had no responsibility for the core accounting processes at CA. I was not in any way a party to any of the illegal behavior at CA, and your implication that I was involved in or had any knowledge of such behavior is simply not true, which is why I corrected you in my comment on your blog.

The "generic title" thing struck me as peculiar, but I let it go. Here's my reply, sent early on Nov. 15:

Actually, the questions I posed in my blog were based on the premise that you were not involved in and had no knowledge of the illegal behavior at CA. I'm still having a difficult time understanding your role at CA during the years when CA was trying to cover up the illegal accounting activity.


Let's focus on the period from 2001 to 2004. Did you have any degree of responsibility for the core accounting processes at CA during that period? If not, what role were you in? If so, what was your level of responsibility?


To whom did you report from 2001 to 2004?


In your comment on my blog post, you stated, "After the Sterling Software integration was compete, I stayed with CA for six years [2001-2007] as part of a new regime and the company specifically asked me to help implement the new, transparent, and open culture and organization." Yet Sanjay was running the company until 2004. You did not respond to my question about this in your email, so I'm still unclear. In what sense was there a "new regime" beginning in 2001?

By Nov. 17 Urquhart hadn't responded, so I emailed a follow-up:

Just following up on this. Will I be getting responses to my questions?

Urquhart replied the same day:

From April 2001 to March 2005, I was responsible for worldwide operations and business support functions at CA and my duties did not involve any of the core accounting processes. Now that I have answered your remaining question, there is no reason for us to continue this discussion.

I then sent this reply:

The problem is you haven't answered my remaining questions. If nothing else, can you tell me in what sense there was a "new regime" at CA beginning in 2001, when Sanjay was there until 2004?

And Urquhart answered:

Please see the last sentence of my previous response.

My reply:

You mean the sentence about there being no reason for us to continue this discussion, or did I miss something? If that's the sentence you're referring to, does that mean you're refusing to respond to my question about what you meant when you wrote about a "new regime" beginning in 2001, when Sanjay was there until 2004?

I haven't heard from Urquhart since, so it's clear he meant that he was cutting off the discussion. What isn't clear is why. When presented with the facts of the case, which made it obvious that he wasn't part of a "new regime" at CA beginning in 2001 as he had claimed (in fact, CA didn't begin cooperating with the federal investigation into CA's accounting practices until October 2003), Urquhart failed to respond to the inconsistency and ultimately clammed up. That approach doesn't bode well for the new regime at FalconStor, a company that's ostensibly trying to clean up its own scandal-stained act.

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Nov 22, 2011 10:55 AM R. Lawson R. Lawson  says:

Another billion dollar story nobody is paying attention to.  This is why people are able to get away with so much.  Journalists rarely ask the types of hard hitting questions you've asked - where there is literally gaping holes from a calendar perspective to be explained.  And rarely do readers understand the complexities of a crime that occurred years ago and over a period of time.

A picture is worth a thousand words Don.  I suggest posting a timeline detailing key events from the beginning and to the bitter end.

I'm not going to make any leaps here and attack the character of Urquhart because of crimes he may or may not have been a part of, or knowledgeable of.  I will however say, Mr. Urquhart, that you did not adequately explain your role in this, what you knew, and when you knew it.

We are talking about investors being robbed of billions Mr. Urquhart.  You were a leader in the company for at least a period of time the crime was occurring, and you were in a position that from what I gather you had the potential and perhaps even the responsibility to have uncovered it.

I truly don't see how a CEO can defraud people of billions without the knowledge of and without a conspiracy involving key people in accounting.

I believe investors need to know that they aren't letting fox in the hen house.  You may be completely innocent of this crime and maybe even a victim of circumstance and bad timing.  Fair or not, that is the situation and I believe that given the magnitude of the crime you need to go out of your way to gain the trust of the public.  "No Comment" isn't exactly gaining the trust of anybody.  In fact, it raises suspicion.


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