CSC Agrees to $190M Settlement Over IT Contract Fraud Allegations
June 10, 2015 in News
On Friday, the Securities and Exchange Commission announced that Virginia-based Computer Sciences Corp. has agreed to pay $190 million to settle allegations of accounting fraud related to its IT contract with the United Kingdom’s National Health Service, Healthcare IT News reports.
NHS contracted with CSC for its National Programme for IT initiative. The project — which is no longer operational — aimed to implement electronic health record systems linked to an interoperable organization-wide framework in the country’s hospitals and health trusts. However, NHS in 2011 discontinued the project after determining that a group of vendors working on the initiative, including CSC, was not able to provide “the modern IT services” it needed.
According to the release, SEC alleged that CSC began “manipulating financial results and concealing significant problems” related to the contract “after the company learned it would lose money on the NHS contract because it was unable to meet certain deadlines.” SEC said the CSC executives added “accounting models that artificially increased its profits but had no basis in reality” to mitigate the lost funds.
Further, SEC alleged that CSC “continued to avoid the financial [effect] of its delays by basing its models on contract amendments it was proposing to the NHS rather than the actual contract.” According to the release, CSC “[b]y basing its models on the flailing proposals … artificially avoided recording significant reductions in its earnings in 2010 and 2011.”
CSC in the settlement agreed to pay a $190 million fine. In addition, five of eight CSC executives who were charged in the allegations also have agreed to separate settlements. They include:
- Former CSC CEO Michael Laphen, who will return more than $3.7 million in compensation and pay a $750,000 fine; and
- Former CFO Michael Mancuso, who will return $369,100 in compensation and pay a $175,000 fine (Miliard, Healthcare IT News, 6/8).
Neither CSC nor the executives admitted to or denied any wrongdoing in the settlement (Jayanthi, Becker’s Health IT CIO Review, 6/9).