Infosys settles sexual harassment suit but controversy continues to kick up dust

THE GRUDGE: Phaneesh claims he wanted to fight the lawsuitOn the morning of April 23, 2003, the downtown offices of the Judicial Administration and Mediation Services in the San Francisco Bay area were abuzz. Inside, legal representatives of Phaneesh Murthy, former head of global sales and marketing at Infosys, Reka Maximovitch, a former Infosys employee and executive assistant to Murthy, and those of Infosys had gathered for a mediation exercise to resolve a million-dollar sexual harassment suit. THE WEDGE: Murthy says Phaneesh withheld crucial informationIt was the third time that Judge Coleman Fannin was attempting to mediate between the aggrieved parties. The retired judge, who commands a hefty fee of $9,000 per day, has an enviable record of settling disputes over the past 30 years. Flitting across the three rooms where the legal counsels were seated, Fannin finally thrashed out an agreement at the end of a long day of deliberations.Under the deal, Infosys agreed to pay $3 million (Rs 14 crore) - inclusive of costs and lawyer fees - to Maximovitch to drop the charges. With that the curtain came down on the case that was first filed on December 17, 2001 and came to a head in July last year when Phaneesh quit Infosys. "The settlement is fair in these circumstances where the perpetrator's conduct was outrageous and the victim's psychological damage was extremely severe," says Randal Aiman-Smith, counsel for Maximovitch.THE CHARGES Phaneesh harassed and pressurised Maximovitch to enter into a sexual relationship with him.On refusing to continue the relationship, she was fired from her job as executive assistant.He continuously stalked her after she took up a new job, causing her immense emotional distress The seven-figure settlement is the largest of its kind in a dispute settled through mediation and not by a jury. The payment would be apportioned equally between Infosys and its insurance company. The insurers would also absorb 80 per cent of the court fees amounting to $900,000. While Phaneesh himself would not be making any payments in the deal, the settlement also gives Infosys the right to proceed against him both for his conduct and for recovery of his contribution. Barely had the ink dried on the settlement deal than a war of words broke out between Phaneesh and his former employers. In Bangalore, N.R. Narayana Murthy, chairman and chief mentor of Infosys, placed the blame squarely on his former US head. He said "the company felt it was important to settle the issue because the allegations were serious in nature" and charged Phaneesh with withholding facts, including his relationship with Maximovitch and that she had filed a charge of discrimination against him and the company. Phaneesh's failure to report this, said Murthy, was "inconsistent" with his official duties and increased the company's risk in the matter. Phaneesh, in a swift response, argued that Infosys had jumped the gun on a settlement to clear the decks for its forthcoming conversion of about three million shares into American Depository Receipts (ADRs). .preferred-source-banner{ margin-top: 10px; margin-bottom:10px;}THE SMUDGE: Infosys spotless image is put to testOn Infosys' hints of legal action against him, Phaneesh claimed that this was in retaliation against his initiating action to retrieve his shares which he claimed Infosys was withholding, thus saddling him with financial losses. In Bangalore, Infosys spokesperson R. Nithyanandan rubbished Phaneesh's claims. He argued that Phaneesh had wilfully agreed to the settlement, even after Infosys imposed three stringent conditions that underlined its right to sue him if it so desired."If Phaneesh believed he was innocent and wanted to clear his name, he should have stayed in the lawsuit and defended his position," he added. As for Phaneesh's charge that the company was withholding his shares, Nithyanandan said the Infosys Employees Welfare Trust was holding 25,600 shares belonging to the former executive as part of the tax indemnity he had signed.Infosys, he reiterated, had not targeted anyone and that over a thousand employees also had their shares held under a similar tax indemnity. For a company that prides itself for upholding corporate ethics, this washing of dirty linen in public is uncharacteristic. Even at the height of the controversy last year, Infosys and Phaneesh had remained tightlipped.THE SETTLEMENT Infosys agreed to pay US $3 million in settlement to Maximovitch for dropping the charges. The amount is to be apportioned between the company and its insurers.Gives Infosys the right to proceed against Phaneesh for conduct as well as recovery. In her suit, Maximovitch had claimed that Phaneesh had forced her to have sex with him. And when she spurned his advances, she was sacked in December 2000. She further charged that Phaneesh had stalked her and had even forced his way into her car. This led her to taking out two restraining orders against Phaneesh between January and June 2001. And, since under California law, actions of the local management are deemed as that of the company, Infosys was vulnerable too. The entire episode has definitely stained the reputation of Infosys as one of India's prime corporates that had in the past set the benchmark for corporate governance. And it came in a week that saw Infosys being pushed out of the top five companies based on market value. Last week, for the first time since the IT boom began nearly five years ago, Infosys slipped to sixth place, its market value slipping to Rs 18,989 crore as against Rs 27,020 crore on April 1. Phaneesh meanwhile isn't doing too badly for himself. His new firm, Primentor, recently brokered a $60 million software outsourcing deal between a leading MNC and an Indian firm. An aggressive deal maker, Phaneesh has leveraged well his array of contacts built over the years. And if Infosys decides not to proceed with its suit against him, he could rest easy. -with Stephen DavidPublished By: AtMigration Published On: May 26, 2003--- ENDS ---

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Infosys settles sexual harassment suit but controversy continues to kick up dust

Despite Infosys settling the messy sexual harassment suit against a former senior executive out of court, the controversy continues to kick up dust.

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