CSC to pay $190m to settle US probe

CSC has reached a proposed agreement with the US Securities and Exchange Commission that will see it restate its results for 2010, 2011 and 2012.

The company will also pay $190m (£122m) to settle a case brought by the SEC alleging that it violated antifraud, reporting, and books and records laws.

The company has not admitted any wrongdoing in relation to the charges, which relate to its activities in Australia, Denmark, and England; where it was involved in the National Programme for IT in the NHS. It will have an independent consultant review its compliance policies.

CSC became the local service provider for all of the North, Midlands and East of England after the other LSP for the region, Accenture, pulled out of the programme.

It was contracted to supply ‘strategic’ IT systems to health communities across the NME, but its chosen system, Lorenzo, ran into development and deployment delays.

In the end, the company bought the system from its developer, iSoft, and reached an agreement with the Department of Health that removed its exclusive right to supply systems to the area.

The deal, which was only finalised in 2013, also made central funding available for trusts that still wanted Lorenzo. To date, nine trusts have taken up the offer, while CSC has started to win Lorenzo business outside the old NME regions.

CSC also deployed many ‘interim’ systems to both acute and mental health trusts, and these contracts will expire in 2016.

NHS England has warned that managing the transition of the ‘NME 180’ trusts onto new systems will be a major challenge over the next 18 months.  

In a filing to the SEC, CSC says it conducted its own investigation and uncovered “certain historic errors and irregularities” relating to the Nordics, Australia, and the NHS.

It says it reported these errors to the SEC as it conducted its investigation, made changes to its working practices, and implemented further controls.

The filing says: “The company has been in continuing discussions with the SEC’s staff concerning a potential resolution of the SEC’s investigation.

“Many of these discussions have concerned the company’s prior use in fiscal years 2009-12 of the terms of the ongoing NHS contract negotiations… with respect to the margin used in recognising profit under [percentage of completion] accounting and in evaluating the recoverability of NHS contract assets.

“The company has now reached an understanding with the staff of the SEC regarding a settlement.”

In summary, the SEC will allege violations of various anti-fraud and reporting laws, and CSC will neither admit nor deny them, while promising not to breach them in the future.

It will also restate its financial results for the years running up to the new agreement with the DH.

This will see it move the $1.16 billion write-down that it took on its NHS contract to 2011 from 2012 and make other changes that will decrease its stated income in 2011 but increase it the following year.

CSC will also pay a penalty of $190 million to the SEC, and record this as a pre-tax change in its accounts for the third quarter of 2015, which ends on 31 December.

Various US business papers have said CSC has declined to make further comment on the SEC filing.

CSC reported revenue of just over $3 billion for the three months to 3 October.

Most of this money came from its global business services, global infrastructure services, and North American public sector services, according to Bloomberg, which also reported that its shares rose on the news of the SEC deal.