UK NHS IT supplier CSC coughs up $190m fine, three execs in the dock

Computer Science Corporation has paid its $190m (£122m) fine, levied by US watchdog the Securities and Exchange Commission over charges the Virginia-headquartered biz fudged its financial reports.

And now some senior executives have agreed to hand back millions of dollars in pay and bonuses as a result of the SEC's probings.

The primary charges stem from CSC's largest government customer, Britain's National Health Service. The tech supply giant was heavily involved in the NHS's National Programme for IT, but delays and failures on the project meant that by 2009 the company was losing money on the deal, which should have shown up on the balance sheet.

The SEC said that former CSC CEO Michael Laphen told former CFO Michael Mancuso to conceal the situation by claiming that the biz was negotiating an increased fee for its work. This ploy, we're told, worked until 2012, when the NHS went public with details of the bungled CSC contract.

"When companies face significant difficulties impacting their businesses, they and their top executives must truthfully disclose this information to investors," said Andrew Ceresney, director of the SEC's Division of Enforcement today.

"CSC repeatedly based its financial results and disclosures on the NHS contract it was negotiating rather than the one it actually had, and misled investors about the true status of the contract. The significant sanctions in this case against the company, CEO, and CFO reflect our focus on ensuring that such misconduct is vigorously pursued and punished."

As is the way with thee settlements, the company has agreed to the payout on the condition it doesn't have to admit any wrongdoing. Laphen has agreed to pay back $3.7m in salary, and a $750,000 fine, while Mancuso will return $369,100 in compensation and pay a $175,000 fine.

Meanwhile, the SEC is taking three of CSC finance execs to court: Robert Sutcliffe, Edward Parker, and Chris Edwards.

Sutcliffe is alleged to have taken part in the NHS scam, but Parker and Edwards are being charged with wrongdoing in other overseas branches of CSC's worldwide operations – in its Australian and Nordic offices respectively.

Parker was the financial controller of CSC Down Under. The regulator claims he, along with regional CFO Wayne Banks, overstated CSC's operating results by more than 5 per cent in 2009 to meet analysts' targets. Banks agreed to settle the charges by coughing up $13,390 and accepting a four-year ban on practicing as an accountant. Parker wants to fight to clear his name.

Chris Edwards, a finance manager in CSC Nordic, is accused of shifting expenses into "prepaid assets" to make the firm's figures look better. Two other associates were also charged but settled out of court and accepted a three-year ban on practicing accountancy.

"The wide-ranging misconduct in this case spanned several countries and occurred over multiple years, reflecting significant management lapses and internal controls failures," said Stephen Cohen, associate director in the SEC's Division of Enforcement on Friday.

"We expect this settlement and the recommendations of an independent ethics and compliance consultant will help prevent future misconduct." ®