CSC pays $190M to settle 4-year-old accounting fraud case with SEC
- 31 December, 2014 00:22
IT services company CSC will pay US$190 million to settle a case brought by the U.S. Securities and Exchange Commission over four-year-old charges that it violated U.S. antifraud, reporting, and books-and-records laws. The company did not admit guilt, but has promised not to violate those laws in future.
The charges concerned accounting entries relating to CSC's activities in Australia and Denmark, and to the company's contractual relationship with the U.K National Health Service (NHS) over the failed National Program for IT (NPfIT), the company said.
It published details of the settlement Monday, in a filing with the SEC dated Friday.
The company has previously acknowledged accounting irregularities in Australia and Denmark, uncovered in internal audits triggered by the SEC's investigation.
CSC will book a $200 million charge to cover the fine and the cost of compliance. That sum, though, is dwarfed by the disputed $2.75 billion goodwill impairment charge relating to the failed NHS project, of which the SEC ordered CSC to move $2.51 billion to its 2011 financial year from 2012.
That came about partly because CSC overestimated the profit it had made on the partially completed contract. It agreed with the SEC that in future it will assume zero profit from contract revenue accounted for on a percentage-of-completion basis.
As a result of the restatements, CSC's consolidated reports for its financial years from 2009 through 2012 should no longer be relied upon, the company said.
Last month CSC reported results for the second quarter of its 2015 financial year.
For the three months to Oct. 3, it reported revenue of $3.08 billion, down 3.4 percent from a year earlier, and net earnings of $151 million, down from $232 million a year earlier. The company is still carrying $1.68 billion of goodwill on its books. The company's revenue is comes almost equally from three streams: global business services, global infrastructure services, and North American public sector services, with the proportions more or less stable over the past year. The infrastructure services division is struggling compared to the other two, with around half the operating margin of its siblings, and half the value in forward bookings.
Peter Sayer covers general technology breaking news for IDG News Service, with a special interest in open source software and related European intellectual property legislation. Send comments and news tips to Peter at email@example.com.