Info-tech

Whistleblower group accuses Infosys CEO of 'unethical practices' to boost numbers

Our Bureau Bengaluru | Updated on October 28, 2019 Published on October 21, 2019

For Infosys, India’s second-largest IT services company, the woe caused by whistleblowers just doesn’t seem to end. In its latest missive, Ethical Employees, a whistleblower group, has allegedly complained to the US Securities and Exchange Commission and the Infosys Board that CEO Salil Parekh was indulging in “unethical practices” to boost short-term revenues and profits.

The whistleblower group said it has recordings and mails to show that Infosys was indulging in such practices.

Also read: Another Infosys whistleblower points to lapses in governance standards; writes to SEBI, SEC

The email to the board and the SEC is dated September 20, 2019, while another email dated October 3, 2019, has been sent to the US Labour Department’s Office of the Whistleblower Protection Program enclosing “documentary evidence’’ and voice recordings on several allegations made in the earlier email. “We have not sent to the company as our identity would be revealed,” the email to the US Labour Office said.

 

The complaint alleges that CEO Salil Parekh bypasses reviews and approvals for large deals. First reported by a financial newspaper, the complaint alleges that Parekh directs his key employees to make “assumptions” to show margins.

Also read: Full text of the whistleblower's letter to the Infosys Board and the US SEC

The whistleblower group also claims that the CFO is complicit in the wrongdoing. It alleges that several billion-dollar deals in the last few quarters had a nil margin and asked the company to get deal proposals, margins, undisclosed up-front commitments and revenue recognition checked by auditors.

Infosys’ response

Infosys, in a statement, said: “The whistleblower complaint has been placed before the Audit Committee per the Company’s practice and will be dealt with in accordance with its whistleblowers policy.”

Podcast | Infosys whistleblower: What next for Salil Parekh?

The whistleblower’s allegations detail how complainants were asked to not fully recognise visa costs in the quarter and were pressurised to not immediately recognise $50 million in reversals in a contract.

It alleged that the CEO and CFO Nilanjan Roy were pressuring the finance team to show more profits in their treasury management by taking risks and making changes to policies.

Not the first time

In 2017 and 2018, a previous whistleblower had raised questions over corporate governance issues at Infosys.

Indian regulator SEBI had even set up a probe committee to find out whether the allegations were true or not.

The whistleblower had questioned the ₹17.4 crore severance package of former CFO Rajiv Bansal and the financial irregularities in Infosys’ $200 million acquisition of Israeli software firm, Panaya.

Following the allegations and several developments later, the then Infosys CEO Vishal Sikka was forced to step down. He was replaced by current CEO Salil Parekh, while co-founder Nandan Nilekani took over as the non-executive chairman.

'Urgent action needed'

InGovern, a proxy advisory firm, said the whistleblower’s allegations against Infosys are specific in nature, and the audit committee needs to investigate and give investors the correct picture. 

Shriram Subramanian, Managing Director of InGovern, said that last time, there was not much depth to the whistleblower complaint. But this time, there are specific complaints. “No two ways about it. It calls for urgent and express action,” he told BusinessLine. He said if there are accounting irregularities, then the board should take note of it. “Investors expect best practices from Infosys,” he added.

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Published on October 21, 2019
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