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Is the Infosys House of B-1 Cards Starting to Fall?

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Amid signs that Infosys is increasingly concerned about the ramifications of the U.S. government’s ongoing investigation of alleged widespread fraud related to the illegal use of B-1 visas, and the prospect of additional grand jury subpoenas being issued, Infosys has called in the cavalry in the form of company founder and former chairman  Narayana Murthy.

Infosys announced on June 1 that its board of directors had appointed Murthy as executive chairman “in the interest of all stakeholders, particularly shareholders large and small, who have asked for strengthening of the executive leadership during this challenging time.” Murthy had stepped down from the chairmanship two years ago, when the U.S. government’s B-1 visa fraud investigation was just ramping up. As I reported at the time, Murthy was obviously troubled with the cloud that was looming over the company he had founded:

Narayana Murthy, the founder and outgoing chairman of Infosys Technologies, appears to be genuinely burdened by the ramifications of the visa fraud lawsuit brought against the company by Infosys employee and whistleblower Jay Palmer. Speaking on Saturday at his last shareholders meeting as chairman, he singled the case out as a source of sadness, and gave no indication that he believes there are no grounds for Palmer's allegations. Murthy's reference to the case was particularly noteworthy in that he was compelled to mention it in what were relatively brief remarks to a global constituency as he was ending his 30-year career at Infosys. 

This is what Murthy said:

It is not easy for me to deliver my last address at this forum. As I speak, a mosaic of images from the past whizz through my mind. As I leave the board, I feel sad that Infosys has been issued a subpoena by a grand jury in the U.S. on the B1 issue. The issue will be decided on its merits in due course.

Palmer’s retaliation and harassment case, which sparked the multi-agency visa fraud investigation, was ultimately dismissed by a federal judge who ruled that under state employment law in Alabama where the case was filed, Palmer couldn’t recover damages for retaliation. The way that law is written, the judge explained, an “employee may be demoted, denied a promotion, or otherwise adversely treated for any reason, good or bad, or even for no reason at all.” The judge did not rule that Infosys had not retaliated against Palmer, only that under Alabama law, Palmer couldn’t sue for damages.

Yet  the leadership of Infosys at the highest levels misrepresented the facts of the ruling. Infosys CEO S.D. Shibulal, reveling in what he presented as a victory for Infosys, went so far as to make this statement:

Today's decision confirms what we have been saying from the beginning, that Palmer's claims of retaliation were completely unfounded. This is a company built on core values that include leadership by example, integrity and transparency.

As I explained, the claim that the judge’s ruling confirmed that Palmer’s retaliation allegations were unfounded is entirely untrue. In any case, Shibulal was emboldened to make the comment, “We believe these [U.S. government investigations], too, are baseless.”

That remark was illustrative of the type of carelessness—some might call it “cluelessness”—that has characterized the Infosys leadership of late, and that sparked the clamor among Infosys’s shareholders that ultimately led to the dramatic step of bringing Murthy back to try to clean up the mess.

At least Murthy had had the decency and good sense, when he stepped down two years ago, to demonstrate some contrition about the B-1 allegations and to say that the B-1 issue “will be decided on its merits in due course.” Shibulal’s apparent incapacity to demonstrate that same good judgment has made him look kind of silly, especially in the wake of what Infosys was compelled to report in an SEC filing last month.

Infosys has referred to the grand jury subpoena and the U.S. government’s investigation as a matter of course in SEC filings over the past two years. But on May 13, when Infosys filed its Form 20-F, the annual report that must be filed by any foreign company that sells shares in the United States, the company broke the news to its shareholders that it had recently been advised by U.S. government authorities that the investigation was continuing, and that additional subpoenas may be issued.

Perhaps it’s just a coincidence that it was less than three weeks after that filing that Murthy was called back to Infosys for the purpose of “strengthening of the executive leadership.” In any case, the strongest leaders are those who admit their mistakes, correct them, and learn from them. If Murthy genuinely plans to exemplify that strength, his first order of business should be to reach out to Palmer, embrace him, and apologize to him for what Infosys has put him through for two-and-a-half years. Beyond simply being the right thing to do, it would help validate, in however small a measure, Shibulal’s claim that Infosys is “a company built on core values that include leadership by example, integrity and transparency.”

Infosys did not respond to a request for comment.

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