Whistleblower case: Infosys audit panel found no 'financial impropriety'

The investigation conducted by Infosys is independent of two other investigations being conducted by the US market regulator SEC, and Sebi
Information technology services major Infosys on Friday said its audit committee found “no evidence of financial impropriety or executive misconduct” at the firm as alleged by whistle-blower letters last year. The investigation was carried out with the help of external agencies.

The Bengaluru-headquartered firm, in a seven-page release, rejected each of the allegations made in the anonymous whistle-blower complaints disclosed on October 21. This came on a day when the company announced its financial earnings for the third quarter of 2019-20.

The company said the audit committee, headed by Independent Director D Sundaram and assisted by independent legal counsel Shardul Amarchand Mangaldas & Co and PricewaterhouseCoopers, found that the “allegations are substantially without merit”.

Based on the findings, the committee said the restatement of previously announced financial statements or other published financial information was not required.

“The committee took the complaints seriously and commissioned a thorough investigation. It determined that there was no evidence of financial impropriety or executive misconduct,” said Sundaram.

Infosys co-founder and chairman Nandan Nilekani, who was present at the earnings press conference, vouched for the firm’s corporate governance standards and ethics, which he said continues to remain undiluted. “I am pleased that after a rigorous investigation, the committee has found no wrongdoing by the company or its executives. CEO Salil Parekh and CFO Nilanjan Roy are strong custodians of the company’s proud heritage,” he said. 

The investigation conducted by Infosys, however, is independent of two other investigations being conducted by the US market regulator SEC, and Indian regulator Securities and Exchange Board of India (Sebi), based on the same whistleblower complaints.

Additionally, the NYSE-listed company is also facing a shareholders’ class action lawsuit that was filed in the district court of New York, in October. The company said, it would contest the lawsuit.

“The Group is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the company’s results of operations or financial condition,” a statutory filing by Infosys disclosed to the exchanges, said.

In a letter dated September 20, 2019, an anonymous group calling itself as “Ethical Employees”, had alleged that Infosys’ current management was taking “unethical” steps to inflate short-term revenue and profit. 

In the letter, the whistleblower flagged concerns about several zero-margins deals, saying they were closed by flouting norms. The whistleblower also made several personal charges against Parekh, and Roy.

During the probe, Infosys said, the investigation team conducted an extensive analysis, 128 interviews with 77 persons, including relevant company officials mentioned in the allegations. The process also involved identifying 46 custodians for collection of relevant documents and electronic data apart from reviewing over over eight terabytes of electronic data involving 210,000 documents from electronic sources and imaged devices.

Additionally, the company consulted independent internal auditors Ernst & Young on large deals and treasury-related processes, the findings of which were shared with the probe team.

“While our business is focused on delivering solutions for a changing world, for 38 years our culture and values have remained constant,” said Nilekani. “Infosys is a model of strong corporate governance, and the company’s handling of these allegations from start to finish has been consistent with these high standards of governance.”

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