Controversy
In a statement, Infosys said: “The complaint has been placed before the Audit Committee and will be dealt with in accordance with the Company’s whistleblowers policy”.
Infosys CEO Salil Parekh

Bengaluru-based IT major Infosys finds itself in controversy, as a section of its top leadership has been accused of unethical practices by whistleblowers, who are allegedly employees of the company. The whistleblowers, who call themselves ‘Ethical Employees’ have accused Infosys’s Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy of unethical practices for many quarters. The news was first reported by the Economic Times. 

"Parekh and Roy have been resorting to unethical practices for many quarters, as evident from their emails and voice recordings of their conversations,” read a letter written by ‘Ethical Employees’ which was submitted to the company’s board of directors on September 20.

The group then allegedly wrote a letter to the US Securities and Exchange Commission (SEC) regarding the allegations against Salil Parekh that he was indulging in “unethical practices” to increase short-term revenues and profits. 

“This quarter, there is a lot of pressure to not recognize reversals of $50 mn of upfront payment in FDR contract, 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,” the letter to the Board read.

It further added that critical information is hidden from auditors and the Board of Directors as well. “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 investigators ask us. We are asked not to share large deal information with auditors,” it added. 

The letter further alleges that the CEO was bypassing reviews and also made racist comments about others on the board.

“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. Those two Madrasis (Sundaram and Prahalad) and Diva (Kiran) make silly points, you just nod and ignore them We have voice recordings of this. Several billion dollar deals of last few quarters have nil margin,” the letter further added. 

Biocon chairperson Kiran Mazumdar-Shaw is an independent director on the Infosys board.

When there was no response from the board to their letter, an unnamed whistleblower on behalf of the employees on October 3 wrote to the US-based office of the Whistleblower Protection Programme, alleging wilful mis-statement material accounting irregularities for (the) last two quarters (April-September).

"In (the) last quarter (July-September), we were asked not to fully recognise costs like visa costs to improve profits. We have voice recordings of these conversations," claimed the letter.

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.

In a statement, Infosys said: “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”.

With IANS inputs