The Securities and Exchange Commission on Friday sealed a $190
million settlement with Computer Sciences Corp. in connection with
accounting fraud charges against the information-technology
services provider.
The agency had reached a tentative settlement with Computer
Sciences worth the same amount in December, but recent media
reports suggested that in-fighting at the agency could result in a
lower fine.
The Wall Street Journal said this week that Chair Mary Jo
White's agenda at the SEC has been thwarted by bickering among its
five members, and the New York Times reported late last month that
divisions within the agency had disrupted the case against Computer
Sciences.
A representative from the SEC wasn't immediately available for
comment.
According to the commission, CSC manipulated financial results
and concealed problems about the company's largest contract, with
the U.K.'s National Health Service, on which it was set to lose
money on account of missed deadlines.
To avoid a resulting hit to its earnings, Robert Sutcliffe,
CSC's finance director for the multi-billion contract, allegedly
added items to CSC's accounting models that artificially increased
its profits.
With then-Chief Executive Michael Laphen's approval, CSC
continued to avoid the financial impact of its delays by basing its
models on contract amendments it was proposing to the NHS, and that
the NHS was rejecting, rather than on the actual contract, the SEC
said.
By basing its models on a negotiated contract rather than the
actual contract, CSC artificially avoided recording significant
reductions in its earnings in 2010 and 2011, according to the
SEC.
"The wide-ranging misconduct in this case spanned several
countries and occurred over multiple years, reflecting significant
management lapses and internal controls failures," said Stephen
Cohen of the SEC's enforcement division.
He added the agency expects the settlement and its
recommendations of an independent ethics and compliance consultant
to help prevent future misconduct.
Eight CSC executives were also charged, and the SEC said five of
the eight agreed to settlements, with former Chief Executive
Michael Laphen agreeing to a $750,000 penalty in addition to about
$3.7 million in back-pay to CSC.
CSC and the five settling executives neither admitted nor denied
the findings, the SEC said.
"We are pleased to settle this long-standing civil investigation
that focused largely on accounting issues from 2009 to 2012," said
Richard Adamonis, a representative for CSC. Mr. Adamonis said the
company has "instituted comprehensive enhancements to our
compliance, financial control and disclosure programs" since
2011.
Attempts to reach Mr. Laphen and Mr. Sutcliffe weren't
immediately successful.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Access Investor Kit for Computer Sciences Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2053631048
Subscribe to WSJ: http://online.wsj.com?mod=djnwires