US-listed shares of Indian IT and outsourcing company Infosys fell 16% on Monday, after reports of anonymous whistleblower complaints alleging unethical practices.
The IT major has acknowledged the matter with an Infosys audit committee looking into whistleblower complaints against top executives. In order to ensure independence in these investigations, the CEO and CFO have been recused from this matter, said chairman Nandan Nilekani in a statement to stock exchanges Tuesday. Infosys will provide a summary of the investigations results at an "appropriate time" he said, adding that the board is committed to uphold highest standard of corporate governance and protect the interests of all stakeholders
A group of anonymous employees sent the letter to the Infosys board on September 20, pointing to multiple instances of unethical practices by CEO Salil Parekh and CFO Nilanjan Roy, especially with regard to large deal wins. The whistleblowers also sent copies of the letter to the US Securities and Exchange Commission (SEC).
Here’s the full text of the letter:
September 20, 2019
Board of Directors,
Respected Sir / Madam,
Disturbing unethical practices
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 current quarter also to boost short term revenue and profits. We are Infosys employees and we have emails and voice recordings on these matters. We hope the board will conduct immediate investigation and take action.
In last quarter, we were asked not to fully recognise costs like visa costs to improve profits. We have voice recordings of these conversations. When auditor opposed, the issue was postponed. This quarter, thee is a lot of pressure to not recognise reversals of $50 million of upfront payment in FDR contact, 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. Critical information is hidden from the auditors and board. In large contracts like Verizon, Intel and JVs in Japan, ABN Amro acqusition, revenue recognition matters are forced which are not as per accounting standards. We have emails and voice recordings and we will share when investors ask us. We are asked not to share large deal information with auditors.
Large deals approvals have irregularities. 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. CEO told us," no one in the board understands these things. They are happy as long as share price is up. These two Madrasis (Sundaram and Prahalad) and Divya (Kiran) make silly points. You just nod and ignore them. " We have voice recordings of this. Several billion dollars deals of last few quarters have nil margin. Please ask auditors to check deal proposals, undisclosed upfront commitments made and revenue recognition. All information is not shared with auditors.
CEO spends two and half days in a week in Ecity and rest in Mumbai. All his travel expenses are paid by the company, for these weekly personal trips. He is green card holder and avoids deduction of taxes during his US travel which is non compliance. Please check and details will be provided.
In board meetings, we are told not to present data on large deals and important financial measures as it will get board attention. 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 20 F and annual report and to share only good and incomplete information with investors and analysts. This is regulatory issue. We have mails and voice records and will share during investigation Whoever disagrees is sidelined and many of them leave. In large deals finance team, important employees are left due to pressure to make deals look good.
We know you will take action and we await to provide details and evidence to investigators.