Info-tech

Infosys shares tank; Nandan Nilekani says CEO Salil Parekh to be recused from probe

Our Bureau Bengaluru | Updated on October 28, 2019 Published on October 22, 2019

Nearly ₹53,000 crore in investor wealth wiped out; law firm to file class action suit

The Infosys stock on Tuesday bore the brunt of a whistleblower group’s allegations, which have rocked the company. The IT major’s shares tanked nearly 17 per cent, recording their worst single-day drop in six years, and wiping out nearly ₹53,000 crore in investors’ wealth.

The scrip tanked 16.21 per cent on the BSE. During the day, it tumbled 16.86 per cent to ₹638.30, the steepest fall since April 2013.

A whistleblower group has claimed in an email to the US Securities and Exchange Commission (SEC), and to the Infosys board, that the company’s CEO was indulging in unethical practices.

 

Damage control

In an attempt to contain the damage, the company’s non-executive chairman Nandan Nilekani, in a statement to the BSE on Tuesday, said Infosys has recused CEO Salil Parekh and CFO Nilanjan Roy from the probe that it plans to conduct. Infosys has retained law firm Shardul Amarchand Mangaldas & Co to conduct an independent probe, he added.

The statement said that following a board meeting on October 11, the company’s Audit Committee began consultations with independent internal auditors EY on terms of reference for a prima facie investigation. It has now retained Shardul Amarchand to conduct an independent investigation, it added.

Podcast | Infosys whistleblower: What next for Salil Parekh?

Recounting the events, the statement said a board member received two anonymous complaints on September 30 — one dated September 20 and titled ‘Disturbing unethical practices’ and the second undated with the title, ‘Whistleblower complaint’.

“Pursuant to our whistleblower practice, we placed both complaints before the Audit Committee on October 10, 2019, and before the non-executive members of the board on October 11, 2019,” Nilekani said in the statement.

These complaints are being dealt with in an objective manner, he emphasised. Since the probe is ongoing, and needs to be conducted in a thorough and objective manner, there will be no further comment, he added. At an appropriate time, Infosys will provide a summary of the investigations results, he added.

 

The undated whistleblower complaint largely deals with allegations relating to Parekh’s travel to the US and Mumbai. Additionally, on October 16, the company was made aware of a letter dated October 3, which was purportedly written to the Office of Whistleblower Protection Program, Washington DC.

“This letter refers to the September 20, 2019 complaint, and to emails and voice recordings in support of the allegations. Although we have not been provided any of the emails or voice recordings, we will ensure that the generalised allegations are investigated to the fullest extent. Additionally, to ensure independence in these investigations, the CEO and CFO have been recused from this matter,” the statement said.

Class action suit

In another development, ‘global investor rights law firm’ The Rosen Law Firm, based in New York, has said it is investigating potential securities claims on behalf of shareholders of Infosys following the whistleblower complaint.

The Rosen Law Firm has, in its website, said it will file an action under the federal securities laws to recover damages and to seek other relief against Infosys. It will prosecute the action on a contingent fee basis and will advance all costs and expenses.

It has further asked those who have purchased Infosys shares to visit its website to join the class action.

Published on October 22, 2019
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