Information technology firm Infosys has asked CEO Salil Parekh and CFO Nilanjan Roy to recuse themselves from internal investigations into allegations of misgovernance against them. This comes in the wake of the emergence of whistleblower allegations of cover up of costs by the top management to boost revenue numbers.
The audit committee at Infosys has assigned the investigation of the “generalised allegations’’ of wrongdoing by the top management to the law firm Shardul Amarchand Mangaldas & Co.
In order “to ensure independence in these investigations, the CEO and CFO have been recused from this matter,’” non-executive chairman of Infosys and co-founder Nandan Nilekani said in a statement shared with the stock exchanges on Tuesday evening.
Anonymous whistleblower allegations of wrongdoing have surfaced at Infosys, with letters of accusations of “unethical practices’’ and “accounting irregularities’’ sent to an Infosys board member and US Securities and Exchange Commission’s whistleblower program.
Infosys officially acknowledged the whistleblower complaints on Monday, saying it has been referred to an audit committee for considering the next course of action.
Explained | The Infosys allegations, and why they matter
On Tuesday, Nilekani provided a broader statement on the nature of the complaints and the course of action the company has taken.
“One Board member received two anonymous complaints on September 30, 2019 one dated September 20, 2019 titled “Disturbing unethical practices” and the second undated with the title, “Whistleblower Complaint,” an Infosys statement attributed to Nilekani said on Tuesday.
These complaints were placed before the audit committee on October 10, 2019, and before the non-executive members of the board on October 11, 2019, the Infosys co-founder has stated.
The complaint regarding “unethical practices” states that whistleblower employees were in possession of emails and audio recordings of the company CEO asking for the hiding of costs incurred on visas and reversals of upfront payments in contracts. The undated “whistleblower complaint” contained allegations about the CEO’s travel to the US and Mumbai, Infosys has stated.
“Additionally, on October 16, 2019, the company was made aware of a letter dated October 3, 2019, 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,’’ the Infosys Ltd chairman said Tuesday.
“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,’’ says the Nilekani statement.
The audit committee at Infosys, comprising board members, in consultation with independent auditors EY have drawn up the terms of investigation and, on Monday, the committee assigned the investigation to Shardul Amarchand Mangaldas & Co, Nilekani said.
“The Board, in consultation with the Audit Committee, will take such steps as may be appropriate based on the outcome of the investigation. Our statutory auditors, Deloitte, India have also been completely updated on this matter post the board meeting of October 11, 2019,’’ he said.
“Because the investigation is ongoing there will be no further comment so that investigation may be conducted in a thorough and objective manner. At the appropriate time we will provide a summary of the investigations results. The board is committed to uphold highest standard of corporate governance and protect the interests of all stakeholders,’’ Nilekani said.
Infosys has posted positive results for the first two quarters of the current fiscal year.
In the quarter ended September 30, the firm reported a revenue growth of 9.9 per cent year on year in dollar terms at $ 3,210 million and an operating margin of 21.7 per cent. In the previous quarter Infosys reported a revenue jump of 10.6 per cent year on year at $ 3,131 million.
American firm readies class action suit to recover losses
New Delhi: Even as Infosys battles whistleblower allegations of using aggressive accounting methods to boost its revenues and margin, a US-based law firm, Rosen Law Firm, which specialises in securities class actions, said it was preparing such a suit to recover losses suffered by the investors.
“Rosen Law Firm is preparing a class action lawsuit to recover losses suffered by Infosys investors,” it said in a statement.
These kind of lawsuits are common in the case of stocks listed in the exchanges in the US whenever there’s some negative news related to companies which see a drop in share prices.— FE