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

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.