CSC says SEC investigation extends to Australian business

Accounting errors and intentional misconduct have been found, according to CSC's CFO

An investigation by the US Securities and Exchange Commission has been expanded to include Computer Sciences Corp.'s business in Australia, the company said on Wednesday.

"Intentional misconduct" had been discovered in Australia in addition to accounting errors, said Vice President and CFO Mike Mancuso during a conference call for CSC's second-quarter financial results.

Mancuso said it did not appear the issues in Australia were on the scale of what happened with CSC's Nordic operations, but are "nonetheless disturbing."

In a filing later Wednesday with the SEC, CSC said it had suspended "certain personnel" in Australia but did not identify those involved. CSC has identified and recorded some US$19 million in "intentional accounting irregularities" and "unintentional accounting errors" related to its Australian operations, the filing added.

CSC said in February that the SEC had opened an investigation into accounting problems. The investigation focuses in part on fraudulent stock manipulation in the Nordic region, and the company has indicated the fraud was allegedly carried out by employees. In June, CSC attributed "the majority" of some $91 million in charges taken during its fiscal 2011 to "accounting irregularities arising from suspected intentional misconduct by certain former employees in our Danish subsidiaries."

Meanwhile, CSC said in Wednesday's filing that an internal audit committee was expanding its investigation to include "certain aspects of [CSC's] accounting practices within its Americas Outsourcing operation" as well as a number of "contracts and related disclosures that involve percentage of completion accounting methodology." These efforts are "in the early stage," CSC added.

On other issues, CSC is still in discussions with the U.K.'s National Health Service (NHS) over how to resolve the IT modernization program that was cancelled by the U.K. government in September.

CSC refunded US$265 million in advanced payments to the NHS, which were intended to fund Lorenzo, a system for sharing patient care records.

CEO Mike Laphen said there is "no assurance" that an agreement with the NHS will be reached soon.

Laphen, who announced his retirement last month, also said CSC is in the process of interviewing candidates for his job, but no replacement has been picked.

Send news tips and comments to jeremy_kirk@idg.com

Additional reporting by Chris Kanaracus

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Tags business issuesservicescscoutsourcingComputer Sciences Corp.Australiafinancial resultsSEC

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Jeremy Kirk

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