The controversy surrounding Infosys over the alleged manipulation of its accounts refuses to go away. In the latest development, a US law firm has filed a class-action suit for misleading the markets.
Schall Law Firm, a shareholder rights litigation firm based in Los Angeles, announced the filing of the suit for using improper accounting methods to boost short-term profits, Indo-Asian News Service reported.
This comes months after a whistleblower complained about Infosys and its CEO Salil Parekh along similar lines. However, the company later said that after an investigation it could not find any evidence.
The complaint in the US said CEO Parekh skipped standard reviews of large deals to avoid accounting scrutiny. In fact, the company’s finance team was pressured to hide details of these deals and other accounting matters from auditors and the company’s board of directors.
“Based on these facts, the company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about Infosys, investors suffered damages,” a statement by the law firm said.
Investors who purchased the company’s securities between July 7, 2018, and October 20, 2019, inclusive the “Class Period,” have been asked to contact the firm before December 23, 2019, it said.
Earlier a group of anonymous employees of the company, who call themselves ‘ethical employees,’ accused Parekh and Chief Financial Officer Nilanjan Roy of unethical practices to boost short-term revenue and profit for recent quarters.
They alleged that the company’s top management presented a rosy financial picture by ignoring visa costs in one quarter, and not immediately recognizing US$50 million in reversals in one contract.
They wrote to the company’s directors and the US Securities and Exchange Commission in September, alleging Parekh and Roy had been resorting to unethical practices for many quarters. They alleged that critical information was hidden from the auditors and board. The commission initiated a probe into the matter.
Infosys last month claimed there was no prima facie evidence to corroborate the whistleblowers’ allegations of financial malfeasance against its top executives.
Infosys chairman Nandan Nilekani came out strongly in support of Parekh and Roy and claimed the company’s processes were very strong and even “God can’t change the numbers of the company.”
Indian market regulator the Securities and Exchange Board of India also sought additional information as part of its probe into the allegations.
The National Financial Reporting Authority – part of the corporate affairs ministry – is also looking into alleged accounting lapses.