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

Cornelia Mascio
Ottobre 22, 2019

Salil Parekh joined the company in January previous year as the CEO.

In a complaint letter to the board of Infosys and the US Securities and Exchange Commission (SEC) on July 20, the group has said it has emails and voice recordings to substantiate their claims. The whistleblowers, who call themselves "Ethical Employees" have accused Infosys's Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy of unethical practices for many quarters.

"Please ask auditors to check deal proposals, margins, undisclosed upfront commitments made and revenue recognition", the letter stated.

The employees have alleged that in the quarter under review of fiscal 2019-20, the management put vast 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.

"This quarter, there is a lot of pressure to not recognize reversals of $50 mn of upfront payment in FDR contract, which is against accounting practice".

"Critical information is hidden from the auditors and the Board".

They alleged irregularities in large deals like Verizon, ABN Amro and a joint venture in Japan, saying revenue recognition was not as per accounting standards.

The employees said they had been instructed not to share large deal information with auditors. "They ask us not to make key disclosures in (Form) 20F (a format required by the SEC for specified information) and annual report, and to share only good and incomplete information with investors and analysts".

"He (Parekh) directs them to make wrong assumptions to show margins".

This explosive letter has put the CEO Salil Parekh in bad light about his attitude towards certain Board of Directors.

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

Infosys says the complaints have been placed before the company's Audit Committee and will be handled in accordance with INFY's whistleblower policy. Deputy CFO (Jayesh Sanghrajka) has also quit, which in itself is an indirect admission that something is rotten.

For Infosys, India's second-largest IT services company, the woe caused by whistleblowers just doesn't seem to end.

Infosys share price is likely to see a 10-15 per cent downside in the near term, said Harit Shah, Research Analyst at Reliance Securities.

The turbulence in global software vendor Infosys over complaints of alleged unethical practices only looks set to get rougher, with unnamed employees accusing a top company official of mocking two independent directors with a derogatory reference to their place of origin, news agency IANS has reported.

Infosys said it has forwarded the whistleblowers' letter to its audit committee.

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