Infosys CEO Salil Parekh, CFO Nilanjan Roy accused of unethical practices; whistleblower's letter before audit committee, says firm

A whistleblower's complaint has once rocked India's IT major Infosys. This time around, the complaints are against CEO Salil Parekh.

Parekh and Roy have been accused of indulging in unethical practices, according to media reports, after the whistleblower's group, called Ethical Employees, reportedly sent a complaint to the US Securities and Exchange Commission and the Infosys board against him.

"Parekh and Roy have been resorting to unethical practices for many quarters, as evident from their e-mails and voice recordings of their conversations," said the complainants, who called themselves 'ethical employees' in a two-page letter to the Bengaluru-based IT behemoth's board of directors on 20 September, a copy of which has been accessed by IANS.

The whistleblower's report alleged that Parekh directed his senior employees to make wrong assumptions to show the margins, according to a report in The Hindu Business Line.

The employees' group, Ethical Employees, in a letter dated 22 September 2019, claimed that they have voice recordings of the chief executive officer (CEO) and the chief financial officer (CFO), Nilanjan Roy, in their possession to prove the allegations against Parekh, said a report in Business Today.

Salil Parekh, CEO and MD, Infosys. Image courtesy - company.

The employees also alleged that Parekh bypassed reviews and approvals to get bigger deals, said the report.

The letter alleged that several billion-dollar deals in the past few quarters had no margin and asked the IT major to examine the deal proposals, margins, undisclosed upfront commitments made and revenue recognition with the help of auditors, according to a news report.

The letter added that the complainants were asked to not fully recognise visa costs in the quarter and were pressured to not immediately recognise $50 million in reversals in a contract, according to a report in The Economic Times.

The employees also alleged that in the quarter under review of fiscal 2019-20, the management put immense pressure on them to not recognise reversals of $50 million of upfront payment in FDR contract, as it will slash profits for the quarter and negatively affect the company's stock price. The letter said not recognising reversals of upfront payment in FDR contract was against fair accounting practice, according to IANS report.

"Critical information is hidden from the auditors and board. In large contracts like Verizon, Intel and JVs (Joint Ventures) in Japan, ABN Amro acquisition, revenue recognition matters are forced which is not as per the accounting standards," said the letter.

The employees said they have been instructed not to share large deal information with auditors.

The plaintiffs are confident of sharing the alleged emails and voice recordings with investigators when demanded.

"The CEO is bypassing reviews and approvals and instructing sales (teams) not to send mails for approvals. He directs them to make wrong assumptions to show margins," recalled the unnamed Infoscions.

Alleging that the CFO (Roy) was hand in glove with the CEO (Parekh), the insiders said the former complied with unethical practices, restraining ethical employees from showing large deal issues to the board during presentations.

Infosys to go through complaint

Infosys has, in a statement, said it will go through the allegations levelled by the employees' group, the company said in a statement.

“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,” Infosys said in the statement.

Jayesh Sanghrajka, VP and deputy CEO resigns

Last week, the IT major's executive vice-president and deputy CFO Jayesh Sanghrajka quit the company, three days after Infosys announced its Q2 results.

He resigned from India's second-largest IT services company after working with it for about 14 years over two stints, said a media report.

In November last year, Sanghrajka was made the interim CFO after the then CFO, MD Ranganath, quit the company, said a report in The Times of India.

Sanghrajka's second innings at Infosys began after he was appointed as the interim CFO.

He had rejoined the company in December 2012 as vice president and corporate financial controller. Prior to that, he was with IT major from 2000 to 2007 as general manager, finance.

Whistleblower complaint against Infosys earlier, too

In 2017, a whistleblower report had alleged wrongdoings by Infosys and some officials in the $200 million acquisition of Israeli automation technology firm Panaya by the Bengaluru-based IT services firm. An internal audit committee set up by Infosys later found no evidence supporting the whistleblower's allegations.

However, Infosys founder N R Narayana Murthy had demanded that the full report by Gibson, Dunn and Crutcher on these whistleblower allegations be made public.

Later in October 2017, the Infosys board—under its then new chairman Nandan Nilekani—gave a clean chit to the controversial Panaya acquisition, saying there was no merit in the allegations of wrongdoing.

It had also said that after a "careful re-consideration" it has concluded that putting out more details of the probe would "inhibit the company's ability to conduct effective investigations into any matter in the future".

— With inputs from agencies