CSC chief Laphen retires as company faces toughest challenges

CSC chief Laphen retires as company faces toughest challenges

Business in crisis? SEC investigations and major NHS-related lawsuit proceed

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CSC's chairman and CEO, Mike Laphen, has announced he will retire from his position within a year - at a time the company faces some of the toughest challenges in its history with a major US SEC regulatory investigation, an accounting scandal and legal challenges over a huge scrapped NHS project.

A Danish accounting scandal at CSC has led to US regulator the Securities & Exchange Commission carrying out a long-running investigation, which is ongoing, and yesterday Danish chief executive Carsten Lind resigned without explanation. Tough discussions also continue with the UK government over the company's £3 billion contract on the failed NHS National Programme for IT, currently the subject of a large investor lawsuit.

Anthony Miller, a veteran analyst and chairman at TechMarket View, said the company has undergone several "meaning of life reviews" as key contract margins have slid downwards. "What is the point of CSC?" he said.

"Nothing much seems to have changed from its old conglomerate-style ‘global’ services operations. Margins are now below five percent, well under half of those of its US-based peers".

Laphen said in a statement that the firm’s "dedicated employees and management team have put CSC on a solid footing, and I am confident that the company is well positioned for its next phase of growth and development".

Although Laphen announced his resignation, no successor has been named at the company. Laphen, a 35-year veteran of the company, will stay on until a replacement is found but no later than 31 October, 2012. CSC has formed a search committee to find a candidate.

The 96,000-employee IT services company has been under severe pressure this year, with the ongoing investigation by the SEC. CSC financial statements have indicated the fraud was allegedly carried out by employees.

Laphen's announcement came on the same day as the resignation of CSC Denmark's CEO, Carsten Lind. No reason was given for Lind's resignation either. He is expected to be replaced by John Walsh, a CSC vice president. CSC's Denmark subsidiaries have lost money for five years, and Lind recently said that "we, as a company, are facing big challenges that require the full attention of the management."

The problems in Denmark have led CSC to warn investors that there could be a substantial consequence for its balance sheet and its reputation as investigations go ahead. It has worked extensively to replace senior staff in the Danish finance department.

Meanwhile, the company is being sued by investors in the US over the NHS debacle, with the Ontario Teachers' Pension Plan, a Canadian fund, alleging the company "fraudulently concealed" the performance of the contract from them and knew it couldn't be fulfilled.

Laphen regularly maintained the project was succeeding. MPs in the UK felt differently.

The Public Accounts Committee said work on the project was so disappointing that ministers should reconsider whether CSC was fit for any more government work.


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