iGate sacks CEO Phaneesh Murthy after sexual harassment charge

Gerhard Watzinger has been appointed as the interim chief executive with immediate effect.

Updated: May 22, 2013, 09:20 AM IST

New Delhi: US-based outsourcing firm iGate Corp on Tuesday sacked the company's Chief Executive Phaneesh Murthy, one of India's best-known IT leaders, for not disclosing a relationship with a subordinate.

Murthy, who was replaced with immediate effect by interim CEO Gerhard Watzinger, denied charges of sexual harassment but admitted of being in relationship with a colleague for "few months." Its a case of extortion, he claimed.

In 2004, Murthy was forced to quit India's second biggest software exporter Infosys Ltd following a sexual harassment lawsuit, which was settled out of court.

IGate, which in its annual report stated that the exit of CEO would impact business, in a statement today said its board engaged outside legal counsel to investigate and found Murthy's failure to disclose relationship with a subordinate.

The probe, which is continuing, has not found any violation of the company's harassment policy, the Fremont, California-based company said.

Murthy, who holds over 6.55 lakh shares in iGate, in a conference call named the woman with whom he said he had a relationship "over the last few months" but claimed he had informed the firm about it and there was no violation of any policy.

"I do believe the charges (of sexual harassment) are incorrect and pursuant to the relationship I had with her over the past few months. I do not believe, I have violated any company policy... I had spoken to the Chairman (iGate) about it," he said. "It was not sexual harassment, it was a few months of relationship."

IGate said the investigation has reached the finding that Murthy's failure to report this relationship violated the company's policy, as well as Murthy's employment contract.

"The board deliberated extensively on this matter," iGate co-founder and co-chairman Sunil Wadhwani said.

"We recognise the significant contributions Murthy has provided over the past ten years in helping to establish iGate as a leader in the IT industry... However, as a result of this violation of iGate policy, we asked Murthy to step down."

"Everything is a regret," Murthy said of the iGate situation. "The entire ordeal is a regret."

US-based iGate in a statement said: "The Board's decision was made as a result of an investigation by outside legal counsel, engaged by the Board, of the facts and circumstances surrounding a relationship Mr Murthy had with a subordinate employee and a claim of sexual harassment.

"The investigation, which is ongoing, has reached the finding that Mr. Murthy's failure to report this relationship violated iGATE's policy, as well as Mr. Murthy's employment contract. The investigation has not uncovered any violation of iGATE's harassment policy."

In a filing to the US Securities and Exchange Commission in March, iGate had said "Our success is highly dependent on the efforts and abilities of our Chief Executive Officer, Phaneesh Murthy and our senior management team. These personnel possess business and technical capabilities that are difficult to replace."

Meanwhile, speaking to reporters in a concall, Murthy said "It was not sexual harassment, it was a few months of relationship."

Murthy, however, he did not disclose any details about the relationship.

"I learnt that she filed charges claiming sexual harassment, which was sent to the company. I do believe the charges are incorrect and pursuant to the relationship I had with her over the past few months. I do not believe, I have violated any company policy...I had spoken to the Chairman (iGate) about it," he said.

On being asked if he is being targeted, he said "without question, it is a case of extortion. Ever since, the first case was made public, people feel it is an easy way of making money."

Murthy said that the woman is being advised by the same lawyer and law firm, which handled the earlier sexual harassment case against him in 2002-03.

On company's statement of conducting a probe and he being asked to present his case, Murthy said "I have not been charged in anyway and I have not received any letter yet."

However, Murthy added that he was not given a chance to represent his case before the company board.

When asked about his future course of action, he said "I don't know exactly what I will do. If the matter is taken to the count, I will definetely contest it. We will defend vigorously if a lawsuit is filed."

On the issue of contesting his termination, Murthy said he will talk to his advisors and lawyers before making a final decision.

On Murthy's sacking and the future course of the company, iGate Co-Founder Ashok Trivedi said "Mr Murthy's departure was not related in any way to the company's operational or financial performance, both of which remain strong."