‘CEO Salil Parekh, CFO Nilanjan Roy indulge in unethical practices’

An anonymous group claiming to be employees of IT major Infosys has written to the company’s board accusing CEO Salil Parekh and CFO Nilanjan Roy of indulging in “unethical practices” to boost short-term revenue and profits.

“We have high respect for all of you and bring to your notice the unethical practices of CEO in recent quarters. Same measures are taken up in the current quarter also to boost short term revenue and profits,” the letter addressed to Board of Directors dated September 20, read.

Calling themselves as “ethical employees”, the “whistleblowers” have said that they have emails and voice recordings on these matters.

“We hope the Board will conduct immediate investigation and take action,” they added.

The Bengaluru-headquartered Infosys said the whistleblower complaint has been placed before the Audit Committee as per the company’s practice.

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

The Whistleblowers have also written to the US-based office of the Whistleblower Protection Programme on October 3, alleging willful 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 whistleblowers have claimed: “We have voice recordings of these conversations. When auditor opposed, the issue was postponed.”

“This quarter, there is lot of pressure to not recognise reversals of $50 mn of upfront payment in FDR contract, which is against accounting practice. As this will reduce profits for the quarter and negative for stock price, they are putting pressure not to take the charge,” they claimed.

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”.

“We have emails and voice recordings and we will share when investigators ask us. We are asked not to share large deal information with auditors,” they said.

“Large deal approvals have irregularities. The CEO is bypassing reviews and approvals and instructing sales not to send mails for approval. He directs them to make wrong assumptions to show margins. CFO is compliant and he prevents us from showing in board presentations large deal issues,” they further alleged.

“The CEO told us, no one in the Board understands these things, they are happy as long as share price is up...”, the group alleged.

Claiming that several billion dollar deals of last few quarters have nil margin, the whistleblowers have urged the Board to ask auditors to check deal proposals, margins, undisclosed upfront commitments made and revenue recognition.

“All information is not shared with auditors.”

“In board meetings, we are told not to present data on large deals and important financial measures as it will get board attention. The CEO and CFO are asking us to show more profits in treasury by taking up risks and make changes to policies. This will provide short term profits. They ask us not to make key disclosures in 20F and annual report and to share only good and incomplete information with investors and analysts,” they wrote.

“Whoever, disagrees is sidelined and many of them leave. In large deal finance team, important employees are left due to pressure to make deals look good,” they claimed.

For the second time after Vishal Sikka, Infosys in January 2018 had roped in Parekh, an external candidate for the CEO role in its over three decade history.

Sikka left Infosys abruptly in August 2017, after a prolonged standoff with promoters including the iconic N R Narayana Murthy over allegations of corporate governance lapses, and hefty severance packages of former executives.

Infosys has received whistleblower 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.

Infosys had said its internal audit committee, after investigation, had found no evidence supporting the allegations.

In 2017, Infosys 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.