Did Infosys Offer Its CFO as a Sacrificial Lamb to U.S. Government Authorities?

Don Tennant

The unexpected announcement last week by Infosys that CFO V. Balakrishnan, a 21-year Infosys veteran, will leave the company at the end of this month is fascinating in view of the timing. I can’t help but wonder whether Balakrishnan’s surprising exit has anything to do with demands that the U.S. government is making as part of a settlement of its criminal investigation of Infosys for alleged visa and tax fraud.

India’s The Economic Times reported the announcement on Oct. 13, noting that the move is raising serious questions:

Balakrishnan, who was seen as a potential successor to chief executive S. D. Shibulal "voluntarily gave up" his position to give "younger blood" a chance, company said in a statement. But the move, which came without warning, raises more questions and adds to the company's challenges as it strives to get back on the growth path after underperforming the industry for over a year.

I’m no genius, but even I know that senior executives who have been with a company for 21 years and who are poised to take the helm as CEO don’t suddenly decide to hit the road to make way for younger blood. That begs the question of the real reason Balakrishnan is leaving. I have a hunch that it all has to do with the settlement of the feds’ criminal investigation. This is nothing but conjecture on my part, but hear me out.

As I wrote in a post back in March, Balakrishnan gave a televised interview in which he categorically denied that the company had done anything wrong. Here’s an excerpt:

We are very clear that we have not violated any of the rules. We believe we have a strong case so the whistle blower case is not a visa case, it is a whistle blower case that will come up for trial somewhere in August. We have to fight it out through the legal process. The other one is a Department of Justice Investigation we are cooperating with them, we are giving all the data. We believe, we have a strong case and see how it goes.

As I noted in that post, I happen to know that the feds weren’t too pleased with Balakrishnan’s gall:

I've heard through the grapevine that the federal authorities who are conducting the criminal investigation, and who have amassed a mountain of incriminating evidence against Infosys (thanks in large part to the cooperation of Jay Palmer, the Infosys employee who blew the whistle on Infosys' illegal activity), were absolutely livid when they saw the video of Balakrishnan making those comments. The federal investigators have met with Infosys' attorneys a couple of times in recent weeks, so it's probably safe to assume that Infosys now has a better sense of exactly how much hot water it's in. If that's the case, it's unsurprising that Infosys would want to avoid doing anything that would be unappreciated by government authorities.

So as the feds and Infosys iron out the details of whatever settlement is reached as a result of the criminal investigation, it wouldn’t surprise me a bit if the real reason for Balakrishnan’s departure has to with one of two scenarios: Either the feds are demanding that he leave, or Infosys is proactively offering him up as a sacrificial lamb to appease U.S. government authorities. In either case, my own view is that Infosys will be in a much better position to recover from the criminal investigation ordeal without him.

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Oct 15, 2012 10:19 AM D. K.Bose D. K.Bose  says:
Some important questions to ask here: Why would fed screatly demand a private firm's CFO to quit? Are they so afraid of someone's presence in a particular position that they are negotiating in this way? Finally, is age taking a toll on Don's logic and analytical reasoning? Reply
Oct 15, 2012 8:38 PM R.K R.K  says:
You just dont get it mate...Perhaps in your zeal to incriminate Infy, you missed reading the complete news. Bala has not exited Infosys, he has just taken a new role in Business and continue to be in the consideration for CEO position. Reply
Oct 15, 2012 8:55 PM C D Mantri C D Mantri  says:
Dear Don, Is this what they call as - clutching at the last straws? Balakrishnan is moving onto a bigger and central role within Infosys. Do you still pride on being investigative journalist, oh i forgot, you never were...maybe. That is just my errr as they say conjecture LOL Reply
Oct 15, 2012 10:06 PM AJ AJ  says:
Bala has not quit the organization. Get your facts right Reply
Oct 15, 2012 10:19 PM noton noton  says:
Don, Am surprised this website is allowing you to post this garbage. Your contention that the feds are going to give in if Infosys gets rid of it's CFO is devoid of logic, which is typical of you. Firstly, the exec under question will continue to be at Infosys, though not as CFO. He is taking charge of a good chunk of the growth business at Infosys - and this is widely seen as prep work for him to take up larger CEO style responsibilities (shudders, though). Secondly, your champion horse Palmer falsified evidence and didn't have a case worth 5 minutes in court - what evidence will he help feds gather. Thirdly, fed will ease pressure for such a small price, that too in an election year? Won't they go for the throat, to appease hillbilly rednecks like you? Reply
Oct 16, 2012 1:35 AM Jacktheripper Jacktheripper  says:
Poorly researched article. A lot of drivel gets published here, but this one takes the cake. Balakrishnan is moving to a different role as a business head within the company, presumably to prep him to take over as CEO at some point. Even the founder of the company recognizes this as a possibility.. http://profit.ndtv.com/news/corporates/article-infosys-extraordinary-bala-definite-ceo-candidate-says-narayana-murthy-312112 Don is definitely losing it.. Reply
Oct 16, 2012 1:53 AM MD MD  says: in response to D. K.Bose
To a workman with only a hammer, everything looks like a nail. Smarting at how the courts threw Jay Palmer's case out of the window, Don's only hope now is an adverse DoJ report. So we have this sorry sight of a modern day Don Quixote tilting at Indian IT companies, wishfully exaggerrating their troubles and hoping and praying that some divine (read federal) hand will come out of the skies and smite these wicked body shops and cleanse this land of imported talent. Reply
Oct 16, 2012 2:07 AM Mike Mike  says:
Bala is not quitting, he is moving to a different role within the organization. He would handle BPO, India and Finacle business of Infosys.Probably to get exposure of delivery and client management. pls get ur facts right. Reply
Oct 16, 2012 7:10 AM Indian Indian  says:
Hi Don, I had earlier commended you for your articles ,but this one has me puzzled. First Bala has not left the company hence wrong fact reported by you.Though he has been "sidelined" in Infosys and hence your hunch is still valid.But then the question arises why Bala only ? Shibulal had earlier given statements that Infosys has done nothing illegal,so why not shibulal first ? Moreover all these visa policies are prerogative of senior HR ,hence why not fire senior HR ? And how is CFO related to formulating Visa policies ? Reply
Oct 16, 2012 7:48 AM Odumbo Odumbo  says:
Desperate times call for desperate measures, huh? Ever since the steam behind all these Infosys allegations died down with the court throwing the case out, people who made a living out of spinning this stuff are desperatly trying to light the flames again hoping to bring back the good'ol days. Get over it. Infosys won this battle and war has been frozen till the election gets over at the least and will most probably get disolved after it's over. First of all, the guy is still in the company! What half baked news report did you read? The dude will be taking over other board roles within the company. Secondly, what kind of stupid deal did the FED make if "asking" the CFO to quit would make them absolve Infosys as some sort of "out of court" settlement? You made the same brouhahaa on outsourcing with another post due to attrition within Infosys conveniently ignoring the fact that those folks were moving over to other outsourcing companies and double digit attrition has been a staple of the Indian IT industry since 2004. It's over. Infosys escaped unscathed. They played this chess game very well. They made some initial clumsy opening moves but their middle game was pretty good. Reply
Oct 16, 2012 10:41 AM ex ex  says:
Don - this proves you are utterly clueless and simply biased. Bala is not quitting, he is moving from CFO post which he i holding for 6 years. Infosys always has been rotating roles - similar thing happened with top most positions this year itself. It is possibly a succession planning. Bala still got a shot at CEO post - he needs to now prove that taking care of a $3B business in BPO, Finacle etc. He is continuing on board as well. With all that clearly out there, how can you make up a hypotheses simply giving your own earlier wrong prediction as the basis? When you make mistakes and get your facts wrong, decent journalists apologize and correct them. I haven't seen you do that so far. Reply
Oct 16, 2012 11:42 AM R. Lawson R. Lawson  says:
http://profit.ndtv.com/news/corporates/article-infosys-extraordinary-bala-definite-ceo-candidate-says-narayana-murthy-312112 Murthy says he is a potential CEO candidate. That may or may not be true - perhaps just a nice gesture given "widespread speculation he is being sidelined". I don't think you let go of people who know all your dirty dealings. They'll want to keep him on their payroll as long as possible. This case needs to go to court. I'm hoping there is no settlement; I want it all on the public record. Reply
Oct 16, 2012 12:39 PM a a  says:
Time to take a break Don before u lose ur mind completely Reply
Oct 16, 2012 10:31 PM jake_leone jake_leone  says:
It seems pretty unlikely, given that this is a civil matter that the InfoSys exec can be compelled to testify. But if he ever winds up in the United States on business, he had better make sure the matter is settled. That alone could limit upward mobility. It's pretty typical that people who know about wrong-doing, are routinely let go. Usually in hope that they will then be hard to locate Reply
Oct 17, 2012 1:59 PM Perturbed Pundit Perturbed Pundit  says:
After reading this blog post, I was about to really let Don have it. However, I see that most of the people who already commented beat me to it. I'm through reading Don's tripe. Reply
Oct 17, 2012 7:40 PM Capt Bullfrog Capt Bullfrog  says:
Ha... look at all the opportunist Infosys darlings stroking their egos. It is so predictable it truly shows the depth. But we knew that, didn't we.... Reply
Oct 18, 2012 6:04 AM Anonymous Anonymous  says:
Don, clearly you have no clue about what you are talking. Bala is being groomed as the next CEO and he hasnt moved away from Infosys. He is part of Infosys family and managing multiple business units. I wonder how you even have a job at IT-business-edge Reply
Oct 18, 2012 7:40 AM Alpha Molecule Alpha Molecule  says:
Beating a dead horse? Reply
Oct 31, 2012 4:00 PM Wakjob Wakjob  says:
Since when can criminal fraud be "settled" away? Crimianls need to be tried an punished. Why are the feds treating this as a civil case when it's criminal? Reply

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