Infosys whiteblower complaint - Stock down by over -14%

Infosys employees made allegations against their CEO & CFO- Salil Parekh, Nilanjan Roy, in an anonymous letter sent by whistleblower employees to the Board, accusing them of unethical practices. The stock fell over 14% after the market opened today reacting on the news.

The allegations are:

  1. Many of the large deals have negligible margins, and the company bypassed appropriate review and approval processes on these deals

  2. Information related to these deals were suppressed from auditors and board members.

  3. Revenue and cost recognition related to some of the large deals have not adhered to accounting standards to help improve near-term profitability.

  4. CEO & CFO put pressure on treasury to boost other income by taking higher risks to help improve near-term profitability.

[Note: Here is the text of the whistleblower’s letter to the Infosys Board and to the US SEC]

What does Infosys say:

The IT major has acknowledged the matter with an Infosys audit committee looking into whistleblower complaints against top executives. It says the matter has been placed before the audit committee of the board chaired by D Sundaram. The panel also comprises independent members Roopa Kudva and Punita Kumar Sinha.

Read more at:


Hi,

I had read this issue related article on yesterday evening from one of the top news portal. They are said stock down by over 16%.

Class action lawsuit has been filed against Infosys in the US court.
SEBI and SEC have both initiated investigations into the whistle-blower allegations.

Although things are unclear and murky right now it does bring into public mind the recently concluded spat between the Board and Management on corporate governance within the company.

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I’m also looking forward to more news from the management regarding the same. However, as the cockroach theory says, “when bad news is revealed about a company there is usually many more around the corner.” That’s why, I’m little skeptical.