A securities lawsuit against iGate Corp. (NASD: IGTE) and its former President and CEO Phaneesh Murthy was filed June 14. Murthy was terminated in May for a violation of company policy for failure to disclose a relationship with a subordinate. The suit claims the company and Murthy withheld information on the relationship and the value of the stock fell once Murthy’s termination was announced.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” according to the complaint.
The lawsuit seeks class actions status to represent all persons, other than defendants, who purchased iGate securities between March 14, 2012 and May 21, 2013.
Murthy was key to iGate’s success, and the former executive created a strategy to offer outcome-based pricing as opposed the industry’s traditional hours-based billing method, according to the lawsuit.
The suit said iGate shares fell nearly 10% on May 21, 2013, the day after iGate announced it terminated Murthy. Shares also fell 4 percent on May 22 after the company announced Murthy was terminated for cause and not entitled to severance under the terms of his employment agreement, according to the lawsuit.
The Economic Times of India reported that an iGate spokesperson said the claims in the lawsuit have no merit and the company intends to defend itself.
The suit was filed by law firm Glancy Binkow & Goldberg LLP and Pomerantz Grossman Hufford Dahlstrom & Gross LLP.
Murthy’s relationship was with Araceli Roiz, iGate’s former head of investor relations, according to the lawsuit. It said the relationship was well known throughout the company and that Roiz is bearing Murthy’s unborn child.
Murthy had been removed from Infosys in the early 2000s on another charge of sexual harassment, according to news reports.