The Phaneesh Murthy saga may have legal consequences for Nasdaq-listed iGATE Corp.
Pomerantz Grossman Hufford Dahlstrom & Gross, a New York-based law firm, has filed a class action lawsuit against iGATE and some of its officials alleging violations of federal securities’ laws.
It seeks compensation for iGATE shareholders who were not informed about former Chief Executive Officer Murthy’s relationship with one of the company’s employees, according to lawyers tracking the development.
In response to a Business Line query, iGATE spokesperson Prabhanjan Deshpande said: “We believe that this claim has no merit, and we intend to vigorously defend this action.”
Murthy could not be reached for comments on Monday evening.
The class action suit has been filed in United States District Court, Northern District of California, on behalf of all those who purchased iGATE shares between March 14, 2012 and May 21, 2013.
The law firm alleges that iGATE and its officials made ‘materially false and misleading statements’ regarding its ‘business, operational and compliance policies’ between March 14, 2012 and May 21, 2013, when Murthy was at the helm of affairs.
On May 20, iGATE’s board had sacked Murthy after an internal investigation revealed that he had a relationship “with a subordinate employee” amidst a claim of sexual harassment. Murthy’s actions were seen as a violation of iGATE internal policies, which requires employees to report any personal relationship at the workplace to their superiors.
Reacting to this development, iGATE shares tanked by nearly 10 per cent to close at $14.82 a share on May 21.
“Murthy’s improper conduct created a risk that he would be terminated from the company, jeopardising the company's future success,” the law firm said in a statement. Earlier this month, Murthy was removed from iGATE’s board.
In a note to investors, Wells Fargo analysts said that Murthy’s departure leaves a void in iGATE and since he was heavily involved in sales, his departure may affect the company’s near term growth
iGATE has appointed Gerhard Watzinger, a 51-year-old industry veteran who was the CEO of iGATE Solutions from 1998-2003 as its interim CEO.