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CSC rocked by Danish accounting scandal

CSC rocked by Danish accounting scandal

Denmark division struggling with failed projects and short term debt

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CSC is facing tough questions from regulators in the US, where it is headquartered, following major problems in Denmark - including an accounting scandal, deepening financial problems and the failure of one of its largest projects. Yesterday the company’s chief executive for Denmark, Carsten Lind, dramatically resigned, and today group chief executive Mike Laphen has announced his resignation within the next year.

The reasons for the resignations have not been officially disclosed. The IT services firm has for several months been under investigation by financial regulator the Securities and Exchange Commission, over allegations of DKK 500 million (£59 million) worth of global stock manipulation through fraudulent financial reporting in Denmark.

[NOW READ CSC chief Laphen retires as company faces toughest challenges]

CSC has maintained former employees were to blame for the Danish problems, and in its attempts to solve the problem has replaced over half of its senior finance staff there and vowed to tighten controls.

On a global level, CSC has warned that its full year accounts stated in May could be adjusted as a result of the Danish problems. CSC is separately embroiled in complex discussions over its £3 billion contract on the failed NHS IT programme (NPfIT), the world’s largest non-military IT scheme, and is being sued by investors over the problems.

Lind confirmed his resignation yesterday to Computerworld UK sister title Computerworld Denmark, but refused to comment on the reasons behind it. He is expected to be replaced by CSC vice president John Walsh.

CSC has for long faced difficult financial problems in Denmark, as all of its subsidiaries lost money for the last five years. The division has run a deficit of DKK 355 million (£42 million), and has a solvency ratio of just 2.8 percent with total liabilities of more than DKK 2.9 billion (£341 million). More than half of its liabilities are short term debt.

Lind said recently that "we, as a company, are facing big challenges that require the full attention of the management".

CSC has also faced major challenges on a project with the Danish Tax and Customs Administration. A senior executive of that administration, one of CSC’s largest customers in Denmark, has accused the company of wilfully obscuring the truth about the project.

"I won't hide the fact that I can only regard what has happened until now as a wilful attempt to obscure the actual state of the project," Deputy Permanent Secretary at the Danish Ministry of Taxation, Jesper Skovhus Poulsen, has said.

Meanwhile, CSC Denmark has been affected by large strikes. The company won a legal dispute over a collective bargaining agreement, but the victory was costly.

Computerworld UK asked CSC for a definitive statement on the SEC investigation and the troubles it is facing, but the company yesterday declined to comment on the investigation.

CSC insisted its “global operations are strong financially and we continue to work closely with regional management to strengthen our operations in the Nordics”.

It added: “The project with the Danish Tax and Customs Administration has been challenging but we are confident that the steps we are taking to address the issue will prove beneficial to our government client and the citizens of Denmark.”

It has not yet provided an official reason for Lind’s resignation.

In May, as the company reported its annual financial results, it warned investors that it was “unable to predict” the potential effect of the investigation “on its business, financial condition or results of operations”.

The subsequent annual report filed with the SEC warned investors of the potential of heavy damage to its reputation. The SEC investigation continues.

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