Bribes-for-jobs scandal rocks TCS, four sacked for corruption

While the exact details of the scam are sketchy, two executives aware of the developments said a whistleblower, in a communication to TCS’s chief executive officer and chief operating officer, alleged that E.S. Chakravarthy, the global head of TCS’s resource management group (RMG), the company’s recruitment division, had been accepting commissions from staffing firms for years.

Following the complaint, the company promptly set up a team of three executives, including the firm’s chief information security officer, Ajit Menon, to probe the allegations.

After weeks of investigation, TCS sent the head of recruitment on leave, sacked four executives from RMG, and blacklisted three staffing firms. Although the company is yet to ascertain the scale of the irregularities, one of the two executives cited above said people involved in the scam may have earned at least ₹100 crore through commissions.

Mint could not independently ascertain the names of the staffing firms that have been blacklisted.

Chakravarthy, who holds the rank of vice president, joined TCS in 1997. He reported to the chief operating officer, Natarajan Ganapathy Subramaniam, and has been debarred from coming to the office, although his email ID is still active, the executive said.

An email sent to Chakravarthy on Monday seeking comment remained unanswered, while a message sent to another executive, Arun G.K., who headed a function in the RMG division and was sacked, on LinkedIn did not elicit a response.

“While there are complaints regarding code of conduct violations that arise from time to time, the company has robust processes for investigating and resolving them to closure," a TCS spokesperson said.

The RMG division, estimated to be 3,000-strong, places almost 1,400 engineers, including new hires, on projects daily, averaging a placement per minute. TCS ended last year with $27.93 billion in revenue and has 614,795 employees.

The two preferred routes for hiring experienced executives for IT services firms such as TCS are employee referral programmes and staffing firms. Even temporary workers or contractors are hired through staffing firms.

This development, a first of its kind of recruitment scandal to hit TCS, comes after K. Krithivasan took over as the company’s chief executive on 1 June.

“The entire senior leadership is shocked," said an executive, who did not want to be identified as he is not authorized to speak with reporters. “This makes you question if there were enough guardrails, and how could such a thing happen."

“The disturbing thing is that we don’t know how pervasive and for how long this scam was continuing. We hired over 300,000 people, including contractors, only in the last three years. Even if 10% of the entire recruitment was made through selected staffing firms and the staffing firm gave a commission on every person recruited, you can imagine the scale of this scandal," said the executive cited above. “I believe it will be at least ₹100 crore."

The development comes as a surprise as major corporations are expected to have robust safeguards to prevent corruption that could hamper operations and sully their image.

“This is common in small firms where corporate governance is perceived to be lax. But news of this recruitment scandal at a company like TCS is a surprise. Simply because all large companies have robust audit practices and no one executive is entrusted with enough powers to abuse his position," said an executive at a Bengaluru-based company.

"With reference to an article published in a media publication today, the Company wishes to clarify as under: The recruitment activities in TCS are not handled by the Resource Management Group (RMG) as alleged, therefore the reference to alleged scam in recruitment process is incorrect," TCS said in a filing to the exchanges post the publication of the news. 

"RMG is responsible for allocation of available resources to various projects and incase of any shortfall, fill such requirements through contractors. The complaint referred to in the article relates to hiring of such contract resources employed by the contractors. On receipt of the complaint, the Company launched a review to examine the allegations in the complaint. Based on the review: (i) this does not involve any fraud by or against the Company and no financial impact; (ii) the issue relates to breach of Company's Code of Conduct by certain employees and vendors providing contractors; and (iii) no key managerial person of the Company has been found to be involved."

This story has been updated to include a clarification from TCS.