Infosys Ltd on Friday said its audit committee has found no evidence of financial impropriety or executive misconduct, virtually giving a clean chit to CEO Salil Parekh and CFO Nilanjan Roy who were accused by anonymous whistleblowers of rigging the company's balance sheet.
In October, Infosys had informed stock exchanges of having received anonymous whistleblower complaints alleging certain unethical practices by the top management. It then started a probe into the matter and roped in external investigators.
"The Infosys audit committee finds no evidence of financial impropriety, or any executive misconduct. We had a long investigation," the company's Chairman Nandan Nilekani said at a press conference.
According to him, the investigation team, which consisted of the independent legal team of Shardul Amarchand Mangaldas & Co, and the auditing firm and PriceWaterhouseCoopers had done 128 interviews with 77 people, identified 46 custodians for all the relevant documents and data, reviewed over 2,10,000 documents from electronic data sources, and the total data which they have processed is eight terabytes.
Expressing his happiness with the outcome of the investigation, Nilekani said Parekh and Roy have emerged from this stronger.
"They (Parekh and Roy) are people who are thorough professionals. They came here to make a difference, they've already made a difference. The last two years since Salil has been here, the company has changed dramatically for the better," Nilekani said.
Stating that the allegations were "substantially without merit", Infosys on Friday offered a point-by-point rebuttal to the allegations made in the complaints.
"The audit committee took the anonymous whistleblower complaints very seriously and commissioned a thorough investigation with the assistance of independent legal counsel. The audit committee determined that there was no evidence of any financial impropriety or executive misconduct," Infosys Audit Committee Chairperson D Sundaram said in a statement.
In one of the letters dated September 20 and signed by 'Ethical Employees', it was alleged that Infosys CEO Salil Parikh as well as its Chief Financial Officer Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards. There was another undated complaint also.
The complaints were placed before the audit committee on October 10, and to the company's non-executive board members on October 11. After that, Infosys had said it was roping in an external law firm to conduct an independent investigation into the allegations.
US market regulator SEC had initiated a probe into the matter, while Rosen Law Firm had said it was preparing a class-action lawsuit to recover losses suffered by Infosys' investors in the US. The Securities and Exchange Board of India (Sebi) had also sought additional information on the issue, while the National Financial Reporting Authority (NFRA), part of the corporate affairs ministry, is also looking into alleged accounting lapses at the firm.
Infosys, in its statement on Friday, said the company continues to cooperate with the Securities and Exchange Commission (SEC) and Indian regulatory authorities. On the stockholder class-action lawsuit, it said the company intends to vigorously defend the litigation.
Nilekani added that Infosys is a model of strong corporate governance, and the company's handling of these allegations from start to finish has been consistent with these high standards of governance.
The investigation concluded that allegations around revenue recognition, bypassing large deals approval process, visa costs and exits in finance team were unsubstantiated.
"On the basis of the interviews conducted and forensics review undertaken, the investigation concludes that all allegations regarding personal matters of the CEO are without merit," he added.
To a question on how the company would maintain the checks and balances to avoid recurrences of such episodes and how it would restrict the disgruntled employees getting access to data and then leaking to media, Nilekani said it is yet to be examined whose handiwork it was.
"If you mean that this is done by disgruntled employees itself needs to be examined. So I would not make that assertion. It could be done by anybody. It could be done, maybe by employees. But equally possibly it's done by somebody outside. So I would not get into a conclusion," he said.
While respecting the Whistleblower Law in the United States, Nilekani said there was a possibility of 'weaponisation' of the law somewhat similar to the misuse of the Right to Information Act and the Public Interest Litigation in India. "In general, you can also have the weaponisation of this law also. Now, this is not an uncommon thing in India. If you look at the Right to Information Act, which is a very noble thing. It's mostly used by guys to find out why the other guy got promotion." "Or if will look at the public interest litigation.
Usually they tend to be private investigations disguised as public interest litigation, or they are publicity interest litigation," Nilekani said.