Rishi Sunak, Infosys & A Legacy of Financial Issues
As the Conservative leadership election rolls on, concerns persist about the origins of the Sunak family fortune, reports Manasa Narayanan for the Byline Intelligence Team and the Citizens
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A new investigation from the Byline Intelligence Team and the Citizens has revealed new concerns over the problematic tax and governance record of Infosys, the Indian company owned by former Chancellor Rishi Sunak’s father-in-law and from which the Conservative Party leadership contender has gained a significant proportion of his wealth.
These include serious allegations of fraud and financial misconduct against Infosys and its top executives. From cases of alleged visa fraud in the United States – for which the company ended up paying an excess of $35 million in settlement over three known cases, to allegations of acquisition-related impropriety and financial misconduct involving top executives of the company, including the CEO and CFO, in India, the list of alleged misdemeanours is long.
Sunak is one of the two candidates in the current Prime Ministerial race, facing off Foreign Secretary, Liz Truss. He is also the wealthiest MP ever to hold office in the UK, making it onto the Sunday Times rich-list thanks to his and his wife’s combined worth of £730 million. The couple’s property alone is worth £15 million.
Now, with the knives out in the leadership race, his wealth has also become a subject of Conservative Party in-fighting. Nadine Dorries, Secretary of State for Digital, Culture, Media and Sport, recently called out Sunak for his £3,500 suit.
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Much of Sunak’s wealth comes from his wife Akshata Murthy – substantial portions of which, in turn, is from her stake in the Indian company Infosys, founded by her father Narayana Murthy in 1981. Infosys is one of the largest IT companies in India, with a revenue of more than $16 billion and market value of $77.88 billion.
Akshata Murthy has a 0.93% stake in this billion dollar company. This means she sits on an estimated wealth of around £700 million, and earns about £11.5 million per year in dividends. Earlier this year, concerns were raised about her avoiding taxes in the UK on this income due to her non-domicile status.
After major backlash, Murthy announced she would now start paying taxes on all her foreign income. But it has been estimated that by use of her status, she has already avoided paying £15 million in taxes since 2015. The revelations came as the UK has been going through a cost of living crisis and ordinary Britons have suffered intensified tax burdens under Sunak, as well as the removal of the £20 Universal Credit uplift that took an average £1000 per year from the country’s poorest families.
It is to be noted that Sunak’s wife, while she has agreed to pay taxes on her Infosys income on a remittance basis henceforth, has not given up her non-dom status. Sunak came out in defence of his wife’s status saying she did nothing legally wrong due to being an Indian national.
While that is the case, Sunak’s previous position in the government and his efforts to become Prime Minister mean it is reasonable to conclude that he and his family are planning to stay in the UK long-term. Ms. Murthy has now lived in the UK for nine years.
Dan Neidle, founder of the non-profit Tax Policy Associates, said Ms. Murthy’s non-dom status means there are still avenues through which she can avoid taxes, for example by having the money transferred to a trust instead of receiving it personally. There is no suggestion she has done so.
Murthy’s continued non-dom status brings further benefits. A 1956 treaty between the UK and India means that an Indian domiciled non-dom is subject to inheritance tax in India and not in the UK. However, India did away with inheritance taxes in the 1980s. “So what this treaty does is it means Ms Murthy will have the inheritance tax benefit from being a non-dom forever,” Neidle added.
This is of particular concern because Sunak, as ex-chancellor and the potential next Prime Minister in the future, had and could soon have power over these very tax rules; creating a conflict of interest between his family’s situation and his political duties.
In addition to the exorbitant wealth the couple has amassed and the issue of tax avoidance, there are serious questions to be asked about the ethics behind the money that they continue to derive from Infosys.
A Troubled History
In one of the recent televised leadership race debates, Sunak said he is proud of the company his parents-in-law have built. But despite the reputation that Narayana Murthy carried for his management of the company – and the larger sentimental and, in Sunak’s own words, “incredibly Conservative story” of rags to riches that he makes full use of in his campaigning – Infosys has had a questionable record having been embroiled in several tax and finance-related cases in recent history.
In 2017, Infosys paid $1 million to the State of New York to settle an alleged case of visa fraud it was involved in 2010-2011. In 2019, it paid $800,000 to the State of California to settle another case of alleged visa and tax fraud, this time for the period 2006-2017.
In both cases, the company was accused of bringing in workers to the United States on H1 visas instead of required H1B visas – and in doing so avoiding taxes and not paying fair wages to its workers.
A similar case in 2014, brought forward by The United States Attorney’s Office for the Eastern District of Texas, the United States Department of State and Department of Homeland Security, alleged “systemic visa fraud and abuse of immigration processes”. Infosys paid $34 million in settlement. The case document noted that Infosys “committed visa fraud by knowingly and unlawfully using B-1 visa holders to perform skilled labour… for the purposes of increasing profits, minimising costs of securing visas, increasing flexibility of employee movement, obtaining an unfair advantage over competitors, and avoiding tax liabilities.”
Infosys denied wrongdoing in all the above cases and maintained that these were “paperwork errors”.
The story of visa violations and tax fraud did not make a sudden appearance in 2014. Back in 2012, two whistleblowers, Jack Palmer and Satya Dev Tripuraneni, in two separate incidents, spoke out against Infosys and filed cases against the company for harassing them when they raised an alarm. The harassment case filed by Palmer was dismissed by the court, but the judge noted it was due to limitations of state law. With Tripuraneni, Infosys managed to settle and the case was dropped. In these instances too, Infosys denied wrongdoing.
While the company has managed to pay inordinate sums of money to avoid litigations in many of these cases, it is clear that there is a pattern of tax-related issues. Outside of the US, it has had a controversial record with its operations in India.
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In 2019, a whistleblower group called Ethical Employees sent a letter to Infosys’ Board of Directors and also notified the U.S. Securities and Exchange Commission (SEC) that the company’s CEO Salil Parekh was indulging in “unethical practices” to boost profits. They said that the CFO Nilanjan Roy was also complicit.
In the letter, whistleblowers made several accusations – including that due process was not being followed by the CEO while undertaking big deals; that they were asked to not share complete information about these deals; asked to hide costs and manipulate policies to show profits in the short-term; and “share only good and incomplete information with investors and analysts.”
They did not receive any responses from the board, leading to them writing to the office’s Whistleblower Protection Programme. Infosys then declared it would launch an audit committee investigation. In January 2020, the committee concluded that it did not find evidence for these claims.
The SEC also looked into the allegations. The investigation did not lead anywhere and Infosys announced in March 2020 that it did not expect the SEC to take further action on the company, with the SEC giving the company a “clean chit”.
This was not an isolated incident. In 2017, Infosys’ then CEO Vishal Sikka had to resign over governance issues. At the time, two whistleblowers are believed to have taken complaints to the Indian regulatory body Sebi about “alleged improprieties” in Infosys’ acquisition of the Israeli firm Panaya. In fact, Narayana Murthy himself had concerns about the brimming issues and asked for the findings of the internal investigations to be made public after several employees involved in the acquisition deal quit after the probe ended.
In all instances of alleged financial and management impropriety, Infosys either seems to settle or conducts non-transparent inquiries acquitting itself of wrongdoings. In cases of external oversight, it is also not clear what goes behind the scenes given exact findings are not accessible in the public domain.
Given the questionable record the firm has, not to add its problematic links to the environmentally damaging oil giant Shell, which is one of Infosys’ top clients, it is concerning that one of the UK’s top ministers and a potential Prime Ministerial candidate is deriving so much wealth from the company.
Speaking on the issue, Professor Jonathan Portes, Professor of Economics and Public Policy at King’s College and Chief Economist at the Cabinet Office from 2008 to 2011, highlighted that the issue may not be about one company such as Infosys, but is more largely about the “actual or perceived conflict of interest” that might arise with any minister receiving so much wealth from a single company, wherein “there might be a good case to make” for placing limits on the wealth ministers can attain.
Neither Sunak not Infosys responded to our requests for comment.