'Ethical employees' accuse Infosys of fudging profit figures

Another whistleblower has surfaced at Infosys and this time has made far more serious allegations against the IT services’ giant, ranging from how certain measures were taken to boost profits to how critical information is hidden from the auditors and the board.

A whistleblower group calling themselves as ‘Ethical Employees’, has alleged that it has emails and voice recordings to prove their charges. The letter dated September 20, 2019 has been sent to the board as well as the US regulator, Securities and Exchange Commission.

Also read: Infosys, TCS, HDFC among 17 Indian firms in Forbes best regarded cos list 

In 2017, a whistleblower raised concerns about how Israeli firm Panaya and Skava were acquired by Infosys for $200 million. He also questioned the severance package of ₹17.4 crore given out to former CFO Rajiv Bansal. Following the complaint and other developments, Infosys CEO Vishal Sikka was forced to resign and so did several members on the board including the chairman.

The latest missive to the board states that the current CEO Salil Parekh has been bypassing reviews and approvals and instructing sales not to send mails for approvals.

Here is the entire text of the letter:

20th Sep 2019

Board of Directors,

Infosys Ltd,

Bangalore.

Respected Sir / Madam,

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, there 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 acquisition, 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.

Sincerely,

Ethical Employees.