Whistleblowers Accuse Infosys CEO, CFO of ‘Unethical Practices’

Infosys said in a statement that the whistleblower complaint had been placed before the audit committee. 

Published
Business
3 min read
Infosys CEO Salil Parekh.
i

A few anonymous employees of the global software vendor Infosys have accused its Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy of unethical practices for “many quarters”.

WHAT DID THE LETTER SAY?

In a two-page letter to the Bengaluru-based IT-behemoth's board of directors on 20 September, the complainants, who called themselves 'ethical employees' said, "Parekh and Roy have been resorting to unethical practices for many quarters, as evident from their emails and voice recordings of their conversations." Along with the company's board, the letter was also addressed to the US Securities and Exchange Commission.

When there was no response from the board to their letter, an unnamed whistleblower, on behalf of the ethical employees on 3 October, wrote to the US-based office of the Whistleblower Protection Programme.

"In (the) last quarter (July-September), we were asked not to fully recognise costs like visa costs to improve profits. We have voice recordings of these conversations," claimed the letter.

The employees also alleged that in the quarter under review of fiscal 2019-20, the management put immense pressure on them to not recognise reversals of $50 million (Rs 353 crore) of upfront payment in FDR contract, as it will slash profits for the quarter and negatively affect the company's stock price. The letter said not recognising reversals of upfront payment in FDR contract was against fair accounting practice, reported IANS.

“Critical information is hidden from the auditors and board. In large contracts like Verizon, Intel and JVs (Joint Ventures) in Japan, ABN Amro acquisition, revenue recognition matters are forced, which is not as per the accounting standards.”
Letter, as quoted by IANS

The employees said they have been instructed not to share a large deal information with auditors.

"The CEO is bypassing reviews and approvals and instructing sales (teams) not to send mails for approvals. He directs them to make wrong assumptions to show margins," recalled the unnamed employees.

The letters also pointed out that several billion dollar deals in the last few quarters were of nil margin, IANS further reported.

"In (the) board meetings, we are told not to present data on large deals and important financial measures, as it will get the board's attention," said their letter.

The software engineers charged that Parekh and Roy directed them to cook the account books to show more profits in the treasury by taking risks and making changes to policies.

"Parekh is a green card holder and avoids deduction of taxes during his US travel, which is non-compliance," said the letter, asking the auditors to take details from the whistleblowers.

The letter stated that the employees were being forced not to make key disclosures in 20F and the annual report, insisting on only sharing good and incomplete information with the investors and analysts.

WHAT INFOSYS SAYS

Responding to the development, Infosys said in a statement on Monday, 21 October, that the whistleblower complaint had been placed before the audit committee as per the company policy.

“The complaint will be dealt with in accordance with the company’s whistleblowers policy.”
Infosys’ statement

Kiran Mazumdar-Shaw, an independent director on the Infosys board told BloombergQuint, "We will follow due process which will be according to the company's whistleblower policy."

WHAT HAPPENED TWO YEARS AGO?

The developments come after Vishal Sikka quit as CEO following a founder-led boardroom coup in 2017, reported BloombergQuint. He also faced whistleblower allegations and corporate governance concerns stemming from his salary and acquisitions and how much Infosys paid for them, it further reported.

(With inputs from IANS and BloombergQuint.)

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