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Firm to pay $190 million to settle accounting fraud case

Firm to pay $190 million to settle accounting fraud case

(Reuters) — Computer Sciences Corp. agreed to pay $190 million to settle civil accounting fraud charges alleging the company manipulated its financial results to hide problems with one of its high-profile contracts, U.S. regulators announced on Friday.

The Securities and Exchange Commission also charged eight former executives in connection with the scheme, five of whom also agreed to settle. The executives who settled neither admitted nor denied the charges.

Among those who settled on Friday was Michael Laphen, the former Computer Sciences chief executive, who agreed to have $3.7 million in compensation clawed back and also to pay a $750,000 penalty.

The company's former Chief Financial Officer Michael Mancuso also settled and agreed to return $369,100 in compensation and pay a $175,000 penalty.

“Putting this matter behind us is in the best interest of CSC, our stakeholders and our ongoing business transformation,” said Richard Adamonis, a spokesman for the company.

“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.”

Attorneys for Messrs. Laphen and Mancuso did not immediately respond to requests for comment.

In the case, the SEC alleges that the company's accounting failures began after it learned that it would lose money on a contract with the United Kingdom's National Health Service.

A scheme was crafted which involved using accounting models to artificially increase profits and making misstatements to investors about the contract with the NHS, the SEC said.

Three of the former executives the SEC says were involved in the scheme are contesting the charges, which were filed in a federal court in Manhattan. The SEC said the three did not have defense attorneys.

The $190 million penalty against Computer Sciences was widely expected, after the company reported it in December. However, delays occurred behind the scenes at the SEC over the case.

Last month, the New York Times reported that the SEC's commissioners were deadlocked, and Chair Mary Jo White was unable to break the impasse because of a conflict of interest. Ms. White's husband's law firm Cravath, Swaine & Moore represented the company.

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