Saturday, 18 May 2013

CSC to pay almost US$100 million to settle Class Action lawsuit



 Bloomberg has reported that Computer Sciences Corp. (CSC) has agreed to pay $97.5 million to settle the class-action lawsuit over alleged false statements about accounting and the company’s performance on a multibillion-dollar contract. A proposed settlement was filed in US federal court and is subject to approval by a judge.

Investors alleged that Computer Sciences officials “made false or misleading statements or omitted to disclose material facts” about the effectiveness of internal controls over financial reporting and about the company’s performance on a $5.4 billion electronic patient records contract with the U.K.’s National Health Service (NHS) , according to a memo filed in support of the settlement.
The “false statement and omissions caused the price of CSC common stock to be artificially inflated” and subsequently declined “when truthful corrective information was disclosed,” lawyers for the plaintiffs said in the memo.

Fuller details are given on:


This is good news for CSC as it removes a major uncertainty which could have deterred a potential investor or acquirer from buying into CSC.

However, US$97 million is a large sum for one group of CSC shareholders to have to pay to another group of shareholders who brought the lawsuit. Additionally, former CEO Michael W Laphen and former CFO Michael Mancuso were also named defendants in the lawsuit.  Is there any chance CSC will try to recover some of the US$97 million from these two?   We do not think so, as CSC will not have admitted any wrongdoing and this will preclude any recovery. So we can just add the whole US$97 million to the already significant cost of Mr Laphen’s period of mismanagement of CSC.  

But even if CSC cannot recover any part of the US$97 million settlement, previous CSC management, specifically Messrs Laphen, Mancuso and former Europe President Guy Hains should  be required to pay back the large bonuses, share options etc awarded to them for  a “performance” which we now know was just smoke. We now know the company was not in fact profitable even though it was reported as being profitable and huge compensation was paid out on that basis. 

Specifically, Guy Hains received $2.2million in 2012 yet he personally led the botched NHS IT project which led to the lawsuit. As President Europe he also had oversight responsibility for the Nordics during the time of their inappropriate accounting practices. Mike Laphen received $20.9million in 2012 just when the company results collapsed.

How anyone can get such large packages for leading the company into the abyss is beyond explanation. That they are not required to reimburse any part even when it is proved that they should never earned those amounts at all is equally beyond explanation.

7 comments:

Anonymous said...

Well looks that CSC employees have to pay for this mis-management & as always the Top Management save their a$$. Just on the name of cost cutting, many employees lost their jobs for no apparent mistake of theirs...
BTW heard the rumour that IBM might be looking at CSC as a potential target. I wish this comes true...

Anonymous said...

CSC have got to be takeover target once this class action gets settled. The recent results show they have taken cost out of the business and will continue to do so to keep EPS in line with expectations even if the top line is shrinking. The stock price has topped out and will if anything edge down further.

Anonymous said...

Any news on the restructure / layering that was due to complete in Jan!!??

How anyone can argue that this is a failed project is beyond me!

Anonymous said...

To answer the question on restructuring, well its complete officially & many have been laid off on some pretext or the other. And having said that, this seems to be a failed project as many still don't know what role they are going to play & what will happen to the grades and promotions...very confusing for employees & I guess even top management. May be the Bonton guys are best to answer if they understand what they did :)

Anonymous said...

Can any remaining csc'ers answer what new layer a PM grade 6 is now?

Anonymous said...

> To answer the question on restructuring, well its complete officially

Is it? Maybe you can tell me which division/department I work in and who my manager is, cus nobody else has?! It might be "complete" in the US and in the smaller divisions (legal, hr, marketing etc), but the bulk of the 60K people in GIS and GBS outside the US are in the dark.

Amparo said...

This is cool!