Despite its acknowledgement last week that some of its employees, along with the company itself, are targets of the federal government's criminal investigation of alleged visa fraud, Infosys is still proclaiming that it is "increasingly bidding for work" with U.S. government agencies.
As I noted in last week's post, "Infosys Warns of Adverse Consequences of Feds' Criminal Investigation," Infosys made that acknowledgement in a routine Form 6-K filing with the U.S. Securities and Exchange Commission. It's noteworthy that in the same document, Infosys stated that it's stepping up its efforts to solicit contracts to supply IT services to the federal government, and warned that there is an inherent risk in such contracts that its employees could violate U.S. anti-corruption regulations.
While it's very true that this is the type of standard risk warning that all public companies provide in SEC filings of this kind, the irony in this case is striking. In a post back in July, "Infosys Attacks Whistleblower in Wake of Senate Testimony," I referred to a Livemint.com report that Infosys Public Services (IPS), the Infosys arm that targets state and federal government business, was taking steps to ramp up its operations in the United States. I suggested that Infosys had earned the chutzpah award of the year:
At a time when the U.S. government is conducting a multi-agency criminal investigation of Infosys stemming from [Infosys employee and whistleblower Jay] Palmer's allegations, Infosys is making a concerted effort to increase its presence in the government sector in the United States, and by extension, to get more money from U.S. taxpayers.
Now, six months later, one might have expected that given the circumstances of having to publicly acknowledge that the company and some of its employees are targets of the federal government's criminal investigation, Infosys would at the very least put its efforts to get more business from the U.S. government on hold. Instead, in that same 6-K filing, Infosys stated that it is "increasingly bidding for work with governments and governmental agencies, both within and outside the United States." One of the particular risks it listed in that context would be amusing, were it not for the seriousness of the problems that Infosys is currently facing:
Government contracts are often subject to more extensive scrutiny and publicity than other contracts. Any negative publicity related to such contracts, regardless of the accuracy of such publicity, may adversely affect our business or reputation.
It was at that point in the document that Infosys went on to warn of the risk that U.S. anti-corruption regulations could be violated:
In addition, we operate in jurisdictions in which local business practices may be inconsistent with international regulatory requirements, including anti-corruption and anti-bribery regulations prescribed under the U.S. Foreign Corrupt Practices Act ("FCPA"), and the Bribery Act 2010 (U.K.), which, among other things, prohibits giving or offering to give anything of value with the intent to influence the awarding of government contracts. Although we believe that we have adequate policies and enforcement mechanisms to ensure legal and regulatory compliance with the FCPA, the Bribery Act 2010 and other similar regulations, it is possible that some of our employees, subcontractors, agents or partners may violate any such legal and regulatory requirements, which may expose us to criminal or civil enforcement actions, including penalties and suspension or disqualification from U.S. federal procurement contracting. If we fail to comply with legal and regulatory requirements, our business and reputation may be harmed.
Again, it needs to be fully understood that including generic warnings of this type is standard practice in public companies' filings with the SEC. That said, what's different in this case are the incriminating circumstances and the timing of the filing of this particular document. In standard practice, the risks that companies list in these documents are purely hypothetical. The tragedy here is that the actions of the Infosys employees who are among the targets of the U.S. government's criminal investigation have swept this filing from the realm of the hypothetical to the realm of reality.