SEC settles accounting fraud charges with Computer Science Corp for $190 mn
06 Jun 2015
US market regulator Securities and Exchange Commission (SEC) yesterday settled a long-standing accounting fraud case with information technology (IT) services major Computer Science Corp (CSC) for approximately $190 million.
The SEC charged CSC and its former senior executives with manipulating financial results and concealing significant problems about company's largest and most high-profile contract, SEC said in a release.
The IT provider agreed to a $190-million penalty to settle the SEC's charges. The SEC additionally charged former finance executives involved with CSC's international businesses for ignoring basic accounting standards to increase reported profits.
The accounting fraud began after the company learned it would lose money on its contract with the UK's National Health Service (NHS) as it was unable to meet certain deadlines, and to avoid the large hit to its earnings, changed its accounting models to artificially inflate profits in 2010 and 2011.
''CSC repeatedly based its financial results and disclosures on the NHS contract it was negotiating rather than the one it actually had, and misled investors about the true status of the contract,'' SEC's enforcement director Andrew Ceresney said.
''The significant sanctions in this case against the company, CEO, and CFO reflect our focus on ensuring that such misconduct is vigorously pursued and punished,'' Ceresney stressed.
According to the SEC, the misconduct of boosting CSC's operating results spanned several countries, including Australia and Denmark and occurred over multiple years, reflecting significant management lapses and internal controls failures.
Five of the eight accused officials agreed to settlements, while the charges filed against three executives are being contested in federal court in Manhattan.
The SEC probe found that CSC's former CEO Michael Laphen and CFO Michael Mancuso repeatedly failed to comply with rules and misled investors about the company's performance and cash flow.
Laphen agreed to pay a sum of $4.45 million in compensation and penalty while Mancuso agreed for $544,100.
CSC and the five settling executives neither admitted nor denied the findings in the SEC's order.
According to media reports, a tentative settlement worth the same amount reached in December was lingering due to in-fighting among the members of the SEC. SEC did not comment on the matter.
Virginia-based CSC is a multinational corporation that provides IT and professional services to businesses and government agencies in 70 countries. The company has around 70,000 employees and its revenue for the year ended 3 April 2015 was $12.2 billion.
Last month, CSC announced plans to split its US public sector business from its commercial and international business.
