On Monday, Indian IT company Infosys said it received whistleblower complaints that alleged "unethical practices" by its senior executives. The software services exporter issued a statement after an anonymous group sent letters to the board and the US Securities and Exchange Commission alleging that the company was taking "unethical" steps to boost short-term revenue and profit. The stock has taken a beating owing to the two letters. On Tuesday, the company said its
auditor Deloitte was informed of the development.
Analysts have said the
stock has come under pressure due to the complaints.
Here is the full text of those letters.
Whistleblower complaint to the Infosys board:
20th Sep 2019
Board of Directors
Disturbing unethical practices
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 the current quarter also to boost short term revenue and profits. We are Infosys employees and we 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 recognize 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 recognize reversals of USD 50 million of upfront payments in FDR contract, which is against accounting practice. As this will reduce profits for the quarter and negative for the stock price, they are putting pressure not to take 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 investigators ask us. We are asked not to share large deal information with auditors.
Large deal 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 complaint 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. Please ask auditors to check deal proposals, margins, 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 in policies. This will provide short term profits. They ask us not to make key disclosures in 20F 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 deal 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 evident to investigators.
Whistleblower complaint to the US SEC:
Office of the Whistleblower protection program
100 F Street NE, Mail stop 5631
Washington DC 20549
Unites States of America
Infosys – Our email of 27
th Sept, 2019 on willful mis-statement and material accounting irregularities for last 2 quarters
As requested, relevant emails and voice recordings on the points raised in our email are enclosed. We have not sent to the company as our identity would be revealed. We are proving additional information to you under whistleblower protection program.
Enclosure 1 is our letter dated 20
th Sep 2019 to the Board of the company requesting immediate investigation. Enclosure 2 to 6 are the email copies on visa costs. Auditors opposed and prevented. The voice recordings and emails show how CEO and CFO wanted this to be pushed bypassing auditors and threatened change of auditors.
Enclosure 7 to 10 are emails on, referred deal upfront payment and the pressure to not take the charge as it would impact profits and stock price. Voice recordings have instructions from CEO and CFO not to present to the board or share important information to auditors. Enclosure 11 to 16 are emails on irregularities in revenue recognition in Verizon, ABN, Intel, Japan JV deals and voice recordings by CFO on not sharing to the auditors and the board.
Enclosure 17 to 20 are mails and voice recordings asking to bypass large deal reviews and concealing information from auditors and the board. Enclosure 21 to 23 are unauthorized personal claims and noncompliance of CEO. These are not approved by the Board. We are prevented from sharing this with auditors. Enclosure 24 to 28 are on instructions and pressure from CFO on changing investment policy and accounting without informing board or auditors to boost short term profits.
The voice recording is large file, so we have enclosed them in pen drive “Truth 1”. They are arranged in folder by date and reference to issues. We have electronic copies of emails and pen drive “Truth 2”. They are password protected and password is sent by email.
As ethical employees, we want to ensure right action.
Thanking you.(Name withheld to protect identity).