IGate CEO Phaneesh Murthy Dismissed Over Relationship

May 21 (Bloomberg) -- Shares of IGate Corp. fell the most
in almost two years after the company dismissed Chief Executive
Officer Phaneesh Murthy, saying he didn’t report a relationship
with an employee.

The stock tumbled 9.6 percent to $14.82 at the close in New
York, the biggest decline since Aug. 8, 2011. Gerhard Watzinger,
52, was appointed president and CEO on an interim basis,
Fremont, California-based IGate said yesterday in a statement.

IGate’s board hired outside investigators and determined
that Murthy’s failure to disclose a relationship violated policy
and his contract. The probe, which is continuing, hasn’t found
any violation of the company’s harassment policy. Murthy was
seen as playing a key role in spurring growth, said Vincent
Colicchio, an analyst at Noble Financial Capital Markets.

“It’s likely to be a loss in terms of the company’s brand
and its growth prospects,” said Colicchio, who has a hold
rating on IGate and owns the shares. “He was out there doing a
lot of sales and marketing.”

Murthy said he had a relationship with a woman “over the
last few months” and informed the company about it. The issue
is with the timing of his declaration and no company policies
were violated, he said on a conference call.

“Everything is a regret,” Murthy said. “The entire
ordeal is a regret.”

The timing of the disclosure violated company policies,
IGate reiterated in a statement.

Infosys Settlements

“Murthy had a relationship with a subordinate employee for
over a year, and failed to report this relationship to the board
during that time,” the company said. “To report the
relationship to the board, more than a year later and after the
relationship ended, is absolutely a violation of iGATE’s policy,
as well as Mr. Murthy’s employment contract.”

In 2004, Murthy and former employer Infosys Ltd. settled a
sexual harassment suit in the U.S. filed by a former employee.
Payment of the $800,000 settlement was split equally between
insurers and Murthy, Infosys, based in Bangalore, said at the
time.

Murthy had resigned from Infosys in July 2002 after Reka
Maximovitch, a former Infosys employee in the U.S., sued for
wrongful termination because she refused to continue a
relationship with him. Infosys settled Maximovitch’s $3 million
claim against the company and Murthy out of court for an
unspecified sum.

Sales, Acquisitions

IGate, which got more than 70 percent of its revenue from
the U.S. last year, provides consulting and technology
outsourcing services to companies ranging from banks to
entertainment companies, according to its website.

Sales in the quarter ended March rose 4.4 percent, compared
with a more than tripling of revenue in the year-earlier period,
according to data compiled by Bloomberg.

In 2011, IGate acquired Patni Computer Systems Ltd. for
$1.22 billion, the second-biggest acquisition of an Indian
technology company, according to data compiled by Bloomberg.
Tech Mahindra Ltd. last year purchased additional shares of
Satyam Computer Services Ltd. to value the target at about 89.9
billion rupees at that time.