Two independent firms appointed by Infosys have cleared the company of all charges of financial impropriety, as alleged in two anonymous letters.
In February, the letters made serious allegations of improper payments in the acquisition of two firms — Panaya and Skava — and also referred to “excessive” expenditure incurred by CEO Vishal Sikka. Both the letters were forwarded to regulator Securities and Exchange Board of India as well.
Gibson Dunn & Crutcher, a US-based law firm, and Control Risks, a risk consulting firm, conducted the investigation. “We found no evidence whatsoever to support any of the new allegations in the complaints regarding wrongdoing by the company or its directors and employees, and those allegations were rebutted by substantial and credible evidence,” Gibson said in a statement. The letter had alleged that Infosys overpaid to buy Panaya and Skava in 2015 in return for kickbacks with fingers pointing at the top management. Panaya was acquired for $200 million and Skava for $120 million.
The US law firm said, “There were no conflicts of interest or kickbacks, required approvals for the acquisitions were obtained, thorough due diligence was conducted, the valuations of the target companies done by an outside financial advisor were reasonable, and the purchase prices were within the range of values determined by that advisor.” The firm said the investigation involved interviews of over 50 witnesses in India, the US and elsewhere, besides the review of company policies, board minutes, public filings and internal documents. It said there was no limitations or restrictions placed on them while they were accessing information from company which includes the directors or employees.
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On the allegation of Sikka receiving inappropriate compensation and incurring excessive expenses relating to travel, security and the Palo Alto office in US, the law firm said, “We found no evidence that the CEO received excessive variable compensation or incurred unreasonable expenses for security, travel and the Palo Alto office.” The increased compensation of $11 million to Sikka also came into sharp focus as this was seen as excessive given the lowered growth prospects of the company. Sikka received only 61% of his total compensation in FY17. The allegations made by the two anonymous letters and the public criticism by co-founder NR Narayana Murthy on the corporate governance practices at Infosys had put the company on the back foot. However, the Infosys top management and the board had consistently denied all these allegations while maintaining that all the transactions were above board. Infosys also faced pressure on the issue of severance payment made to former CFO Rajiv Bansal, who resigned in late 2015. That issue was investigated by Indian law firm Cyril Amarchand Mangaldas.