Infosys is considering appointing law firms JSA Law or Khaitan & Co in a bid to strengthen the investigation into allegations by whistleblowers against top company executives, people familiar with the development told Moneycontrol.
This hiring would be in addition to the Indian IT services major hiring of law firm Shardul Amarchand Mangaldas to independently investigate the whistleblower allegations of accounting malfeasance, according to a The Economic Times report.
Executives familiar with the investigation told Moneycontrol the insider trading angle is not something that the company is concerned about.
No evidence to support whistleblowers' claim
On 3 November, Infosys had said it had received no evidence to support the allegations in a whistleblower letter from last month, sending shares up as much as 6.5 percent in morning trade on Monday (4 November).
A letter, claimed to have been written by employees of the company in October, said Chief Executive Salil Parekh instigated them and others to bypass approvals for large deals, fearing a negative impact on shares from reduced profit.
“There is no supporting evidence that has been received by the company along with these anonymous complaints to substantiate the allegations,” Infosys said in a letter to the National Stock Exchange (NSE) dated 2 November.
Infosys said last month that the US Securities and Exchange Commission (SEC) had launched a probe into whistleblower claims that the Indian software services firm used ‘unethical practices’ to boost revenue and profit.
The complaints were still under investigation and the company was not in a position to determine “concreteness, credibility and materiality of complaints,” the Bengaluru-based company said in its letter to the NSE.
The letter was in reply to the NSE’s request to the company to explain why it had not disclosed the receipt of the letter.
Infosys said since the allegations were not deemed “material” under the Indian regulation, the company was not obligated to disclose them.
Infosys CEO alleged to have made racist remarks
After a whistleblower letter stating alleged financial misconduct and “unethical practice” against Infosys Chief Executive Officer Salil Parekh and chief financial officer Nilanjan Roy, there are allegations of racism and sexism against Parekh levelled at in the letter.
"The CEO told us, no one in the board understands these things, they are happy as long as the share price is up. Those two Madrasis (Sundaram and Prahlad) and Diva (Kiran Mazumdar-Shaw) make silly points, you just nod and ignore them," according to the whistleblower's complaint, media reports said.
D Sundaram, Vice Chairman & Managing Director, TVS Capital Funds Ltd; and D N Prahlad, Founder and CEO of Surya Software Systems Private Limited, are independent directors of Infosys.
Biocon chairperson Shaw is an independent director on the Infosys board.
Nandan Nilekani says speculations against co-founders 'appalling'
Infosys—which is investigating whistleblower complaints that alleged unethical practices by the company's top management—condemned the "mischievous insinuations made by anonymous sources against the co-founders and former colleagues, suggesting their involvement in the recent whistleblower allegations", a PTI report said.
"These speculations are appalling and seem to be aimed at tarnishing the image of some of the most accomplished and respected individuals. I have a deep regard for the life-long contribution of all our co-founders," Infosys Chairman Nandan Nilekani said in a statement.
He added that the co-founders have served the company "selflessly" and remain committed to the long-term success of Infosys.
He pointed out that an external law firm is already conducting an independent investigation into the allegations, and said the outcome of the investigation will be shared with all stakeholders at the relevant time.
Infosys Chairman Nandan Nilekani had said the whistleblower complaint dated 20 September, as well as an undated complaint had been received by one of the board members on 30 September.
In the letter, dated 20 September, and signed by 'Ethical Employees', it was alleged that CEO Salil Parikh as well as Chief Financial Officer Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards.
The complaints were placed before the audit committee on 10 October, and to the company's non-executive board members on 11 October, also the day when Infosys announced its second-quarter results.
US market regulator SEC has also initiated a probe on the matter, while Rosen Law Firm had said it was preparing a class action lawsuit to recover losses suffered by Infosys investors in the US.
Back home, the Securities and Exchange Board of India (Sebi) had sought additional information from the company, while the National Financial Reporting Authority (NFRA) - part of the corporate affairs ministry - is looking into alleged accounting lapses at the firm.
In 2017, Infosys had witnessed a protracted stand-off between its high-profile founders and the previous management over allegations of corporate governance lapses and issues relating to severance package doled out to former executives, including ex-CFO Rajiv Bansal.
Following the tussle, 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. Parekh joined the company in January last year as the CEO.
Infosys has also settled with Sebi the case of alleged disclosure lapses regarding a payment made to Bansal.
--With inputs from agencies
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Updated Date: Nov 11, 2019 12:15:49 IST