A group of anonymous employees have accused Chief Executive Salil Parekh and CFO Nilanjan Roy of unethical practices to boost numbers
Infosys will ensure that the whistle-blower's complaint will be investigated to the 'fullest extent', Chairman Nandan Nilekani said in a statement to stock exchanges.
A group of anonymous employees have accused Chief Executive Salil Parekh and CFO Nilanjan Roy of unethical practices to boost numbers. The group, who call themselves 'ethical employees', have written to the US Securities and Exchange Commission (SEC) and the Infosys board in a letter dated September 20.
Parekh and Roy have been recused from the investigation into the allegations, Nilekani said. "The undated whistle-blower complaint largely deals with allegations relating to the CEO’s international travel to the US and Mumbai," Nilekani added.
The whistle-blowers have also written to the US-based office of the Whistleblower Protection Programme on October 3, alleging wilful misstatement and accounting irregularities for the last two quarters. Stating that in the last quarter, they were asked not to fully recognise costs like visa costs to improve profits, the whistle-blowers have claimed: "We have voice recordings of these conversations. When auditor opposed, the issue was postponed."
Alleging that "critical information" is hidden from the auditors and Board, the letter claimed that in large contracts like Verizon, Intel and JVs in Japan, ABN Amro acquisition, "revenue recognition matters are forced which are not as per accounting standards," they said.
However, Nilekani said the company has not been given emails or voice recordings as evidence of the complaint as mentioned in the whistle-blower complaint.
"Post the Board meeting of October 11, the Audit Committee began consultation with the independent internal auditors (Ernst &Young) on terms of reference for their prima facie investigation," Nilekani said.
Deloitte India, Infosys's statutory auditor, has also been updated about the matter, he stated.
The Bengaluru-headquartered company has received whistle-blower complaints in the past too, over alleged governance lapses. Earlier, one such report had alleged wrongdoings by Infosys while buying Israeli automation technology firm Panaya. The company had said its internal audit committee, after investigation, had found no evidence supporting the allegations.
In 2017, it had witnessed a protracted stand-off between its high profile founders and the previous management over allegations of governance lapses and issues relating to severance package doled out to former executives, including ex-CFO Rajiv Bansal. Following the tussle, the then CEO Vishal Sikka quit followed by some board members. Infosys co-founder Nandan Nilekani was then brought in as Chairman to steer the company. Salil Parekh joined the company in January last year as the CEO.
Infosys has also settled with SEBI the case of alleged disclosure lapses regarding payment made to Bansal earlier this year. It paid Rs 34.34 lakh to the markets regulator to settle the case.
Here is the full text of the statement:
We are providing an update on the steps taken in response to the anonymous whistleblower complaints ("Complaints") that the Company disclosed on October 21st, 2019. 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." Pursuant to our whistleblower practice we have placed both Complaints before the Audit
Committee on October 10, 2019 and before the non-executive members of the Board on October 11, 2019. These Complaints are being dealt with in an objective manner. The undated whistleblower complaint largely deals with allegations relating to the CEO’s international travel to the US and Mumbai.
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 D.C. 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 generalized allegations are investigated to the fullest extent. Additionally, to ensure independence in these investigations the CEO and CFO have been recused from this matter.
Post the Board Meeting of October 11, 2019 the Audit Committee began consultation with the independent internal auditors (Ernst &Young) on terms of reference for their prima facie investigation. The Audit Committee has now retained the law firm of Shardul Amarchand Mangaldas & Co. (October 21, 2019), to conduct an independent investigation. 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.
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.
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