(CN) - A shareholder derivative against IT consulting firm Computer Sciences Corp. and its top brass accuses the company of corporate waste and misleading investors after a series of accounting problems and customer delays.
     According to the complaint, when CSC and its upper echelon announced its quarterly earnings in November 2010, the firm also "revealed that certain accounting irregularities had been discovered in the Company's Nordic Region, which would require a $40 million charge. However, CSC's officers assured shareholders that the accounting problems had been fixed and increased projections for the company's bookings for fiscal year 2011 by $500 million due to a 'solid quarter in new business bookings.'"
     Plaintiff claims the company also "boosted" its earnings forecast for 2011 and assured shareholders that "despite several delays and setbacks," the company was on track with a multi-billion dollar contract with the United Kingdom's National Health Service (NHS).
     The claim alleges that everything was not as rosy as the company purported it to be. Beginning in February 2011, the company began adjusting its financials from fiscal 2010 as a result of accounting fraud. The disclosures allegedly revealed that the firm's "earlier financial projections had been without basis, and that, contrary to its public filings, the Company's internal audit and disclosure-control environment were materially damaged."
     On February 1, 2011 CSC announced that the SEC has launched a formal investigation because of its accounting irregularities. A week later the company "slashed" its fiscal forecast for 2011 bookings by a shocking $2.5 billion. The news kept getting worse, as CSC said the charge for its accounting problems would be over $80 million, which was double what had been originally forecast. The NHS contract from Britain was also threatening to pull the plug because of CSC's delays, plaintiff claims.
     Despite assurances, CSC's internal regulations and accounting problems were more serious than they let on. In June 2011, the company announced that it had been "forced" to make adjustments to the company's 2011 fiscal results because of "intentional misconduct."
     Plaintiff also believes defendants have known since 2008 that CSC was never going to be able to deliver on its promises for the NHS contract and the firm's "internal-control environment was seriously compromised." A confidential witness sent a letter in 2008 which outlined concerns about the internal audit practices at CSC, stating that certain failures "... cost this firm many millions of dollars."
     CSC has, and will continue to, incur hefty expenses as a result of its lax internal controls and SEC investigation, plaintiff claims.
     Plaintiffs are represented by Robert O. Wilson and Eugene J. Benick of Finkelstein Thompson LLP in Washington, D.C. and by Robert C. Schubert, Willem F. Jonckheer, and Jason A. Pikler of Schubert Jonckheer & Kolbe LLP in San Francisco.