India’s Infosys says an internal investigation found no evidence of irregularities

Author: Promit Mukherjee

MUMBAI (Reuters) – An internal investigation by India’s Infosys (INFY.NS) into alleged irregularities related to two acquisitions by the IT services company found no evidence of impropriety, the company said on Friday.

The findings, released in a statement a day before the company’s annual shareholders’ meeting, could quell some of the investor jitters that have plagued Infosys in recent months.

Infosys has hired law firm Gibson Dunn and consultancy Control Risks to investigate allegations made against the company in February by a whistleblower.

These allegations included irregularities in the acquisition of Panaya, a New Jersey-based automation technology provider, and Skava, a Silicon Valley startup, as well as improper compensation paid to Infosys CEO Vishal Sikka.

The whistleblower also accused Sikka of requesting improper transactions with clients, while alleging that the company’s mergers and acquisitions team operated without proper approvals.

A letter from Gibson Dunn to Infosys’ audit committee – published with the company’s statement – said the investigation found “no evidence” that Infosys, its directors or employees had committed any crime.

Apart from the whistleblower allegations, Infosys was also rocked by accusations of lapses in corporate governance by some of its founders.

In early February, television channels reported that the company’s founders, led by its first president NR Narayana Murthy, had written to the board expressing concerns over executive pay increases and severance agreements awarded to two former executives.

Murthy did not return a call seeking comment on the Gibson Dunn report, which also said it found “no evidence that the CEO received excessive variable compensation or incurred unreasonable expenses.”

The internal investigation also included a review of the results of an earlier investigation conducted by Indian law firm Cyril Amarchand Mangaldas (CAM) into the departure of its chief financial officer and the veracity of its findings.

“We also concluded that the two previous CAM investigations were sound and that their findings and conclusions were reasonable and credible in light of the evidence,” Gibson Dunn’s letter reads.

Infosys shares have also come under pressure from political rhetoric in the United States over the outsourcing of American jobs and a proposed tightening of visa rules in a country the company and its rivals rely heavily on.

In a separate statement on Friday, New York Attorney General Eric Schneiderman said Infosys had paid $1 million in compensation for failing to pay appropriate wages to hundreds of employees, failing to pay taxes owed and violating U.S. visa rules.

The settlement resolved whistleblower allegations that Infosys regularly brought foreign IT workers to New York to perform work in violation of the terms of their visas as part of the provision of services.

Since the beginning of 2017, Infosys shares have fallen 6.7 percent, while the Nifty IT index has lost 2.2 percent.

(Editing by Susan Thomas, Euan Rocha and David Goodman)