| Sarin: Under a cloud
London, Dec. 22 (PTI): India-born Arun Sarin, the newly appointed chief executive of Vodafone, may face a potentially damaging lawsuit in the US over allegations of Enron-type accounting practices, a media report said.
A telecom company once run by Sarin has been accused of overstating its revenues and issuing false predictions for its earnings potential, The Sunday Observer reported.
However, Vodafone chairman Lord MacLaurin said: “The whole of the industry had a bad time and we all got legal actions in the US. It’s a very litigious society.” He said Vodafone would not fund Sarin’s defence.
A Vodafone spokesman said Sarin’s background had been thoroughly vetted before he was appointed. “Vodafone takes the issue of corporate governance very seriously. If there were any outstanding issues we would have taken them into account,” he said.
According to a class action filed in the US against the Nasdaq-listed infrastructure firm Infospace, which Sarin headed between April 2000 and January 2001, the company concealed its “true operating performance in order to artificially inflate the market price of its securities”.
The lawsuit, filed by New York-based Wolf, Haldenstein, Adler, Freeman and Herz, the same firm which earlier this year filed a claim against Vodafone, alleges that between January 2000 and January 2001, Infospace “disseminated false and misleading information concerning its actual full year 1999 and 2000 financial performance.” The lawsuit also alleges that Infospace’s accounts had not been prepared in conformity with generally agreed accounting policies and that the firm had understated the true size of its expenses. It claims the company failed to pay 200 employees up to $ 5 million in overtime in a bid to mask the true cost of its workforce.
According to the report, the lawsuit claims that on December 13, 2000, Sarin reiterated his confidence in Infospace’s future at a time when it is alleged the company was experiencing a downturn. “Infospace continues to experience momentum across all of our areas of focus and we remain very confident with the financial guidance we have previously provided,” Sarin had said.
However, the suit alleges that in fact Infospace was “not experiencing strong demand” and that once Sarin stood down in January 2001 the firm “confirmed the worst nightmare of investors.” It concludes that Infospace had overstated revenues for the “quarter and year ended December 31, 1999, the quarters ended March 31 2000, June 30, 2000, September 30, 2000 and the quarter and year ended December 31, 2000.”