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Large CSC project dumped amid growing crisis

Outsourcer facing challenges on multiple fronts

CSC, which is embroiled in potentially damaging fraud allegations and shareholder lawsuits, has lost a large project mired by cost overruns and angry political arguments.

The Danish national police dropped the project, known as Polsag, that had been under development by CSC. The cost has ballooned from the $153 million budgeted to $425 million. CSC has not commented.

Polsag has been eight years in the making. The project began in November 2004, with an agreement to modernise police systems. In January 2005, politicians in parliament gave the green light to the project, and in late 2006, the police were ready to sign the contract for the final development of Polsag.

CSC is facing growing troubles on other fronts.

As a US- listed company, CSC is being investigated by US financial regulator the SEC over fraud allegations, concerning alleged financial malpractice in Denmark and Australia.

In Denmark, it is facing an accounting scandal, deepening financial problems and the failure of one of its largest projects - all of which are understood to have played a part in the dramatic resignation last year of its country manager there, Carsten Lind. The allegations also refer to DKK 500 million (£59 million) worth of global stock manipulation through alleged fraudulent financial reporting.

CSC has also faced major challenges on a project with the Danish Tax and Customs Administration. A senior executive of that administration, one of CSC's largest customers in Denmark, has accused the company of wilfully obscuring the truth about the project.

CSC has maintained former employees were to blame for the Danish problems, and in its attempts to solve the problem has replaced over half of its senior finance staff there and vowed to tighten controls

"Intentional misconduct" had also been discovered in Australia, CSC has said.

In December, the company announced it was facing a potential £960 million writedown on its NHS contract. CSC invested heavily in the programme, yet only delivered patient administration systems to a handful of trusts. The programme has now been decentralised and CSC is no longer expected to deliver the systems to a significant number of the trusts originally contracted.

The powerful UK Public Accounts Committee said CSC's performance on the project was so poor that the government would be wise to reconsider whether to give any more work to the supplier.

CSC is also being sued by a large pension fund, which is a major shareholder and alleges that the company painted an inaccurate and unfairly positive picture of its prospects on the NHS programme.

In November, CSC reported a wounding £1.77 billion quarterly loss. Group chief executive Mike Laphen announced his resignation within the next year, though he did not disclose any reason for the timing.


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