CSC Books Called ‘Unspeakably Unacceptable’

WASHINGTON (CN) - Computer Sciences Corp. will pay $190 million to settle fraud charges with the SEC, and five of eight executives charged will cough up millions more.

The chairman of the United Kingdom's Public Accounts Committee called CSC's actions "unspeakably unacceptable," and said, "There is no way these guys ought to be working for the government."

The settled administrative complaint accused CSC and its executives of juggling the books to conceal "significant problems about the company's largest and most high-profile contract," the SEC said in a statement announcing the June 5 settlement.

The charges, initially filed in Manhattan Federal Court, involve CSC's multibillion-dollar contract with the United Kingdom's National Health Service.

The SEC said the accounting and disclosure fraud began when CSC would lose money on the NHS contract for failing to meet deadlines.

To avoid reporting its decreased earnings, the SEC said in a statement, CSC's finance director for the contract "added items to CSC's accounting models that artificially increased its profits but had no basis in reality."

The finance director of the NHS contract, Robert Sutcliffe, is contesting the charges alleged in the federal complaint. Also contesting the charges are CSC executives Edward Parker and Chris Edwards.

Former CEO Michael Laphen agreed to repay CSC more than $3.7 million under the clawback provision of the Sarbanes-Oxley Act, and pay a $750,000 fine.

Former CFO Michael Mancuso agreed to repay $269,100 and pay a $175,000 fine.

The SEC said SCS refused to record "significant reductions in its earnings in 2010 and 2011," though NHS "repeatedly rejected CSC's requests that the NHS pay the company higher prices for less work."

It was in rejecting CSC's proposed "models" of "progressively higher pay" for poor performance that the English committee called CSC "unspeakably unacceptable," as quoted in the SEC's settled complaint.

Wayne Banks, regional CFO for Australia, will disgorge $10,900 and another $2,400 in interest and is barred for 4 years from practicing as an accountant before the SEC.

Nordic region executive Paul Wakefield settled by accepting a 3-year bar from practicing as an accountant before the SEC. Nordic region executive Claus Zilmer also settled, though the SEC did not disclose what his agreement was.

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