IBM’s Board of Directors is investigating an alleged fraud scheme spanning from 2017 to 2021. Executives allegedly manipulated sales figures to claim higher bonuses. Shareholders pressure the board to resolve the case.
A group of shareholders and six law firms pressure IBM to find out whether former CEO Ginni Rometty and current CEO Arvind Krishna manipulated sales figures. According to the allegations, financial reports were inflated to generate higher bonuses for executives.
The scheme allegedly spanned from April 4 2017 and October 20 2021, violating accounting rules and funnelling billions of dollars in revenue from the mainframe division to the company’s strategic CAMSS unit (Cloud, Analytics, Mobile, Security and Systems).
IBM allegedly rewarded executives and encouraged sales staff to sell CAMSS products with high bonuses. As a result, revenue from the mainframe division was booked as CAMMS income, leading to higher bonuses.
According to the shareholders, the scheme painted a false picture of the tech giant’s revenue. Misinforming investors is punishable by law. The accused executives are current CEO Krishna, former CEO Rometty, former CFO Martin Schroeter — now CEO of IBM spin-off Kyndryl — and current CFO James Kavanaugh.
The complaint
The shareholders sued IBM in the Southern District Court of New York earlier this year. The lawsuit states that if IBM’s board defaults, a lawsuit will be filed claiming millions in bonuses from the accused executives. The lawsuit would likely be filed in the company’s name, meaning all returns go directly to the company — and not to shareholders.
IBM confirmed that it received the initial lawsuit in a recent filing with the US Securities and Exchange Commission (SEC). The organization did not comment on the possibility of a second lawsuit.
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