Infosys faces class-action lawsuit in the US

Nikhil Varma, DHNS, Bengaluru,

Dec 12 2019, 18:34 ist
updated: Dec 12 2019, 19:24 ist

Infosys had made false and misleading statements to the market and used improper recognition of revenue to boost short-term profits, according to the complaint. Photo/Reuters

A US-based based shareholder rights litigation firm, Schall Law Firm has said that it has filed a class-action lawsuit against tech giant Infosys over alleged impropriety in financial statements.

According to the complaint, Infosys had made false and misleading statements to the market and used improper recognition of revenue to boost short-term profits.

The complaint says that CEO Salil Parekh had 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.

The law firm, in a filing to the SEC, said that investors who purchased Infosys securities between July 7, 2018, and October 20, 2019, could participate in the lawsuit by December 23.

“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 firm said.

Schall said it encourages investors with losses in excess of $100,000 to contact the firm.

The class-action lawsuit against Infosys has been filed for violations of 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the US Securities and Exchange Commission, the firm said.

This comes months after the whistleblower groups’ letter, which was first published by DH, alleged charges of financial impropriety along with racism and misogyny by the company’s CEO & MD Salil Parekh.

The letter alleged that Parekh, other than inflating profits and revenue, has been foregoing due diligence in signing large deals.

The letter also alleged that the company’s chief financial officer Nilanjan Roy has been hand in glove with Parekh in fudging accounts. It is alleged that Parekh made racist and misogynistic comments against the board members. In fact, as soon as Roy as CFO of the company stopped reporting the gross hiring numbers every quarter, the letter had said.