CSC Hit With $190M Penalty As It Settles SEC Probe And Restates Earnings

As a four-year probe comes to a close, CSC is facing a $190 million penalty, earnings restatement and review of its accounting compliance practices as part of a settlement with the Securities and Exchange Commission (SEC).

The settlement is the result of a formal civil investigation, launched in January 2011, into CSC's earnings disclosures and accounting practices. In particular, the probe looked into possible "historic errors and irregularities" around CSC's profit margins for its U.K National Health Service (NHS) contracts, according to an 8K SEC Filing disclosed Monday.

"As fully outlined in our SEC filing, CSC has reached an agreement in principle with the U.S. Securities and Exchange Commission to settle a long-standing civil investigation involving certain accounting matters dating back to 2009 through 2012," a CSC spokesperson told CRN.

[Related: Report: CSC Knocks On Private Equity Doors, Weighs Leveraged Buyout]

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CSC, which is No. 4 on CRN's SP500 list, will have to restate goodwill and impairment charges in FY2011 and FY2012, as well as reduce net income by $50 million in FY2010 and $3.69 billion in FY2011. That, in turn, will increase net income in FY2012 by $3.9 billion.

While these changes sound large, CSC said in the 8K filing that they will have no impact on its operations, earnings or cash flows and "only immaterial impacts" on equity and balance sheets for FY2013, FY2014 and the first two quarters of next year.

After self-reporting the problem in 2011, CSC said it took steps to remedy the errors, including firing appropriate employees, strengthening internal compliance controls, restricting the audit group, and creating an independent audit group and Chief Accounting Officer.

Going forward, CSC said that it will pay the $190 million penalty as well as conduct an independent review of its compliance policies.