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Computer Sciences Fined $190 Million in U.S. Fraud Case

June 5, 2015
The SEC announcement came after a report Thursday that CSC was in talks to be acquired by Hewlett-Packard before negotiations broke down last month.

NEW YORK—Computer Sciences Corporation will pay $190 million to settle charges of accounting fraud that inflated earnings five years ago, U.S. securities regulators announced Friday.

Five of eight former CSC executives who were charged agreed to settle, including former chief executive Michael Laphen, who will return to the company $3.7 million in compensation and also pay a $750,000 penalty, the Securities and Exchange Commission said.

The SEC said CSC began one aspect of its fraud when it discovered it would lose money on a contract with Britain's National Health Services because it would miss deadlines.

CSC officials changed their accounting models on the NHS contract in ways "that artificially increased its profits but had no basis in reality," the SEC said.

These changes allowed CSC to avoid big hits to earnings in 2010 and 2011. The SEC also accused Laphen and former chief financial officer Michael Mancuso of misleading statements about the NHS contract.

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

"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 SEC also found that CSC staff in Australia overstated earnings in 2009 by failing to record required expenses. 

In the Nordic region, the SEC found "a variety of accounting manipulations" to fraudulently lift earnings, including improperly accounting for client disputes and overstating assets.

CSC said it neither admitted nor denied the SEC's allegations. The company has previously implemented a number of steps to train employees, hire compliance staff and boost internal controls.

CSC described the broad terms of the settlement in a December 2014 securities filing. The agreement was approved by the SEC Thursday, the company said.

The SEC's announcement follows a Bloomberg report Thursday that CSC was in talks to be acquired by Hewlett-Packard before negotiations broke down last month. CSC provides information technology integration services to private and government clients.

In mid-morning trade, CSC shares fell 0.3% to $67.52.

Copyright Agence France-Presse, 2015

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