Computer Sciences Corp. agreed to pay $190 million to settle U.S. regulatory claims that it falsified financial results to hide losses. Two former executives will forfeit millions of dollars in pay tied to the misstatements.
Former Chief Executive Officer Michael Laphen will return more than $3.7 million to the company under the Sarbanes-Oxley Act provision that claws back compensation from executives when accounting fraud happens on their watch, the Securities and Exchange Commission said in a statement Friday. Michael Mancuso, the ex-chief financial officer, will pay about $544,100 as part of the accord.
The company disclosed in December an agreement in principle to pay $190 million to settle the SEC’s claims. According to the regulator, CSC manipulated accounting models in 2010 and 2011 to hide a drop in earnings after it failed to meet deadlines for a contract with the U.K.’s National Health Service. Laphen and Mancuso made public statements about the NHS contract that misled investors about the company’s performance, the SEC said.
“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,” SEC Enforcement Director Andrew Ceresney said in the statement. “The significant sanctions in this case against the company, CEO, and CFO reflect our focus on ensuring that such misconduct is vigorously pursued and punished.”
Sarbanes-Oxley, which was passed in 2002 in the wake of massive accounting frauds at Enron Corp. and WorldCom Inc., required CEOs and CFOs to return bonuses and other incentive pay if their companies manipulated financial results.
Laphen earned about $19.4 million in bonuses and equity-based compensation in 2010 and 2011, according to securities filings. Mancuso was paid about $4.7 million over those two years, filings show.
In settling the claims, neither CSC nor the executives admitted or denied the SEC’s allegations. The company said in a statement that it cooperated with the SEC’s investigation from the outset.
“The company installed new leadership in 2012, made adjustments to prior period financial statements in our SEC filings, and since the beginning of 2011 has instituted comprehensive enhancements to our compliance, financial control and disclosure programs,” CSC said.
Former CSC executives Wayne Banks, Paul Wakefield and Claus Zilmer also agreed to settle the SEC’s claims for their roles in the misstatements. Former executives Chris Edwards, Edward Parker, and Robert Sutcliffe are fighting the agency’s claims in federal court in New York, the SEC said.
Attorneys for Laphen, Mancuso, Banks and Wakefield didn’t return phone calls and e-mails seeking comment. The SEC said there is no known defense counsel for the other former executives.