The Securities and Exchange Commission has charged Computer Sciences Corporation and former executives with manipulating financial results and concealing significant problems regarding the company’s NHS contract.
The company has agreed to pay a £124 million penalty to settle the charges, and five of the eight charged executives have agreed to settlements. As part of the settlement agreement, CSC neither admits nor denies the SEC’s allegations.
Former CEO Michael Laphen has agreed to return to CSC more than $3.7 million in compensation and pay a $750,000 penalty. Former CFO Michael Mancuso will return $369,100 in compensation and pay a $175,000 penalty.
The SEC alleges that CSC’s accounting and disclosure fraud began after the company learned it would lose money on its NHS contract because it was unable to meet certain deadlines.
The commission’s investigation found that Laphen and Mancuso repeatedly failed to comply with multiple rules requiring them to disclose these issues to investors, and they made public statements about the NHS contract that misled investors about CSC’s performance.
The SEC has filed complaints in federal court in Manhattan against former CSC finance executives Robert Sutcliffe, Edward Parker, and Chris Edwards, who are contesting the charges against them. Sutcliffe was CSC’s finance director for its multi-billion pound contract with the NHS, which the SEC describes as the company’s, “largest and most high-profile contract”.
CSC became the local service provider for all of the North, Midlands and East of England as part of the National Programme for IT after the other LSP for the region, Accenture, pulled out of the programme.
It was contracted to supply ‘strategic’ IT systems to health communities across the NME, but its chosen system, Lorenzo, ran into development and deployment delays.
“When companies face significant difficulties impacting their businesses, they and their top executives must truthfully disclose this information to investors,” said Andrew Ceresney, director of the SEC’s Division of Enforcement.
“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.”
The SEC’s investigation also found that CSC and finance executives in Australia and Denmark fraudulently manipulated the financial results of the company’s businesses in those regions.
A statement from CSC says the company is pleased to have settled the long-standing investigation.
"Putting this matter behind us is in the best interest of CSC, our stakeholders, and our ongoing business transformation,” it says.
“From the outset, CSC cooperated with the SEC’s Division of Enforcement. The company installed new leadership in 2012, made adjustments to prior period financial statements in our SEC filings, and since the beginning of 2011 has instituted comprehensive enhancements to our compliance, financial control and disclosure programmes.”