CSC finance director exits as fraud probe hits UK

A CSC finance director has quit, while a number of his peers face disciplinary action intended to stamp out accounting problems that have drawn the attention of US regulators.

It emerged last week that a year-long investigation, which has already lead to purges of finance departments in Denmark and Australia, has now focused on the UK and engulfed CSC’s troubled NHS contract.

The Cabinet Office has meanwhile extended negotiations with CSC over the NHS contract until 31 August, a year after the coalition government said it had resolved its NHS IT problems.

Neil Malcolm, CSC director of finance for manufacturing, chemicals, energy and natural resources, quit the company on 4 April.

He told Computer Weekly he had not been involved in CSC’s troubled NHS contract. He said he had not been implicated in any fraud investigation. He declined to say whether he had been implicated in a wider investigation into accounting irregularities at CSC.

“I left CSC on 4 April. It wasn’t disciplinary. It was my choice,” he said. “I had nothing to do with the NHS contract.”

“I’m not prepared to discuss this,” he said. “I’m not going to comment on that at all. I’m not going to be drawn into an issue that’s internal to CSC. That’s between me and CSC.”

He said he had been a director of finance for the UK.

CSC refused to discuss the nature of his departure. A CSC spokeswoman said: “It is company policy not to comment on internal matters or matters relating to staff departures.”

Nothing had indicated that Malcolm had been involved in fraud. Andy Thomson, vice president of international finance at CSC, refused to confirm whether Malcolm’s departure was related to any fraud or other accounting irregularities. He refused to answer any questions on the matter.

The majority of CSC’s accounting irregularities, which are being investigated by the US Securities and Exchange Commission, were unearthed in its Managed Services Sector (MSS) business unit, and primarily in the Nordic region, the company said in a financial statement last week.

Irregularities were later discovered to have also involved CSC businesses in Australia and the Americas, as well as the NHS in the UK.

“In the course of the Audit Committee’s expanded investigation, accounting errors and irregularities have been identified. As a result, certain personnel have been reprimanded, suspended, terminated and/or resigned. All of these investigative activities are ongoing,” said the statement.

MSS accounted for 41 per cent of CSC’s $16bn revenue in 2011 when the first irregularities were discovered. MSS houses CSC customers in sectors including aerospace & defense, chemical & natural resources, financial services, healthcare, manufacturing, retail and telecommunications.

$24m of “Intentional irregularities” were found in the accounts of CSC’s £3bn NHS IT contract after a year-long investigation by independent auditors, said CSC.

“Certain CSC finance employees based in the United Kingdom were aware prior to fiscal 2012 of the aforementioned errors, but those employees failed to appropriately correct the errors. Therefore, the Company has classified these errors as intentional. As a result, certain personnel have been suspended and additional disciplinary actions are being considered.”

The errors had overstated CSC’s income from the NHS contract by $24m after failing to account for costs.

Investigators had found other accounting problems with the NHS contract, on which CSC wrote off $1.5bn last year after its continued failure to meet a 2007 deadline to deliver computer systems to health bodies over two-thirds of England. The investigation was ongoing. CSC did not expect further revelations would involve amounts large enough to dent its financials.

The US SEC probe, which is also ongoing, led to a string of revelations about intentional accounting errors in CSC’s Nordics, Australia and Americas businesses. CSC Denmark CEO Carsten Lind resigned as details of the accounting problems broke last Autumn. Hundreds of redundancies have followed in the wake of a major Danish public sector IT failure and the loss of CSC’s largest private sector customer in the region, the telecoms firm TDC, to Indian outsourcer Tata.

CSC is making approximately 1,100 redundancies in the UK, thought to be about 15 per cent of its local workforce, as it stands down teams that had been working on the NHS contract and absorbs the shock of financial results that recorded a $4.3bn worldwide loss last week.

The majority of the loss was attributed to the NHS write-off and a $2.7bn loss of goodwill over numerous acquisitions CSC had made in the last 10 years. $269m was attributed to a settlement CSC made with the US Army over its Logistics Modernisation Programme, one of 11 ERP projects that caused trouble for the US Department of Defence.