New York-Based Law Firm Preparing Class Action Suit Against Infosys After Anonymous Whistleblower Allegations
[ By Bobby Anthony ]New York-based Rosen Law Firm is exploring grounds to file a class action lawsuit against Infosys after a few anonymous whistleblowers employed with Infosys, released a letter which accused its CEO Salil Parekh and Chief Financial Officer Nilanjan Roy of unethical practices for many quarters.The development came immediately after they wrote to the US Securities &...
New York-based Rosen Law Firm is exploring grounds to file a class action lawsuit against Infosys after a few anonymous whistleblowers employed with Infosys, released a letter which accused its CEO Salil Parekh and Chief Financial Officer Nilanjan Roy of unethical practices for many quarters.
The development came immediately after they wrote to the US Securities & Exchange Commission (SEC) and the US-based office of the Whistleblower Protection Program on October 3, alleging willful misstatement and material accounting irregularities to boost revenue and profit margins.
Rosen Law Firm, which specializes in securities class actions, has already put out an Infosys Loss Notice stating it “continues to investigate potential securities claims on behalf of shareholders.”
“Rosen Law Firm is preparing a class action lawsuit to recover losses suffered by Infosys investors,” according to a statement which it has released.
Such notices are common in the case of US-listed stocks when there is material negative news that leads to a drop in stock prices.
Meanwhile, in a related development, there are indications that the Securities & Exchange Board of India (SEBI) may seek clarification from Infosys' management about charges leveled by whistleblowers.
A series of allegations have been leveled by whistleblowers referring to steps taken by CEO Salil Parekh like resorting to unethical practices to boost short-term profit and downsizing expenses by not recognizing visa cost.
In their letter, whistleblowers claimed, “Critical information is hidden from the auditors and board. In large contracts like Verizon and Intel, joint ventures in Japan, and ABN Amro acquisition revenue recognition matters are forced, which is not as per the accounting standards”.
The letter also mentioned about the management putting immense pressure on them to not recognize reversals of Rs 353 crore of upfront payment in the FDR contract, since it would slash profits for the quarter and negatively affect the company's stock price. Not recognizing reversals of upfront payment in FDR contract was against fair accounting practices, the letter stated.
In a statement on October 21, Infosys stated that the whistleblower complaint had been placed before the audit committee as per the company's practice.