COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

Industry

Technology / Software / Electronics

Corporate Headquarters

Teaneck, New Jersey, United States

Summary of Allegations:

Nationality of Foreign Officials: India

Summary of Allegations:

From 2014 to 2016, Cognizant is alleged to have engaged in a bribery scheme in which Cognizant executives in the United States and India authorized various contractors and third party vendors to pay approximately USD 3.6 million in bribes on Cognizant’s behalf to Indian government officials. The bribes were in exchange for permits, clearances, and licenses in connection with the construction and operation of commercial office buildings in India.

Cognizant officials paid commissions to some of the contractors for their role in the scheme and concealed the improper payments in its books and records via falsified contract change orders and false descriptions.  

Cognizant received profits of approximately USD 16.4 million as a result of the scheme.

According to the U.S. SEC, the former chief operating officer of Cognizant Sridhar Thiruvengadam in a  video conference meeting with another three Cognizant executives, authorized the bribe payments and sought to disguise in books and records. He also signed a false sub certification letters to Conigizant’s auditor.

Approximate Alleged Payments to Foreign Officials: USD 3.6 million

Business Advantage Allegedly Obtained: permits, licenses, and clearances in connection with the construction and operation of various commercial buildings.

Enforcement Results

Agencies: India: Central Bureau of Investigation

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

On 4 February 2020, a court in India ordered the Central Bureau of Investigation (“CBI”) to investigate Cognizant’s alleged bribery to public officials for permits of opening local offices.

Agencies: Internal Investigation

Results:

Year Resolved: 2019

Compliance Monitor:

Ongoing: No

Details:

In its Form 8-K filed with the SEC on 30 September 2016, Cognizant disclosed that it is conducting an internal investigation, under the oversight of its audit committee with the assistance of outside counsel, into whether certain payments relating to facilities in India were in potential violation of the FCPA. The investigation is currently focused on a small number of Cognizant owned facilities in India.

In its Form 10-Q filed with the SEC on 7 November 2016, Cognizant disclosed that, to date, the internal investigation has identified a total of approximately USD 5 million in payments that may have been improper.

Furthermore, the investigation found that as of 31 December 2015 and in subsequent interim periods, Cognizant did not maintain an effective internal controls. Specifically, despite Cognizant's established written code of conduct and procedures, Cognizant did not maintain an effective tone at the top as certain members of senior management may have participated in or failed to take action to prevent the making of potentially improper payments by either overriding or failing to enforce the controls established by the Company relating to real estate and procurement principally in connection with permits for certain facilities in India. As a result, Cognizant's disclosure controls and procedures and internal controls over financial reporting as of 31 December 2015 were ineffective.

On 9 February 2017, Cognizant disclosed that the investigation has progressed significantly and the company has identified "potentially improper payments" worth USD 6 million being paid for company-owned facilities in India. The figure is reportedly higher than the earlier estimate, from its Form 10-Q filed with the SEC on 7 November 2016, of USD 5 million.

In its Form 10-K filed with the SEC on 1 March 2017, Cognizant disclosed that the company incurred USD 27 million in costs related to the FCPA investigation and related lawsuits.

Agencies: United States: Civil Lawsuit

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

On 5 October 2016 and 27 October 2016, two putative securities class action complaints were filed in the U.S. District Court for the District of New Jersey on behalf of a putative class of stockholders who purchased Cognizant's common stock during the period between 25 February 2016 and 30 September 2016. 

On 18 November 2016, another plaintiff filed a third putative securities class action complaint in the U.S. District Court for the District of New Jersey on behalf of a putative class of stockholders who purchased Cognizant's common stock during the period between 27 February 2015 and 30 September 2016.

The complaints collectively name Cognizant and certain of its current and former officers as defendants and allege that the defendants made false or misleading statements related to potential violations of the FCPA, Cognizant's business, prospects and operations, and the effectiveness of the company's internal control over financial reporting and our disclosure controls and procedures. The plaintiffs collectively seek awards of compensatory damages, among other relief, and their costs and attorneys’ and experts’ fees.

On 3 February 2017, the U.S. District Court for the District of New Jersey issued an order to consolidate the three putative securities class actions.

On 31 October 2016, 15 November 2016, and 18 November 2016, three putative shareholder derivative complaints were filed in New Jersey Superior Court, Bergen County, against all of Cognizant's directors and certain of its current and former officers as defendants. On 24 January 2017, the New Jersey Superior Court, Bergen County, consolidated the three putative shareholder derivative actions filed in that court. The complaints assert claims for breach of fiduciary duty, corporate waste, unjust enrichment, abuse of control, mismanagement, and/or insider selling by defendants.

On 22 February 2017, a fourth putative shareholder derivative complaint asserting similar claims was filed in the U.S. District Court for the District of New Jersey naming the same defendants. The complaints allege among other things that certain of Cognizant's public disclosures were false and misleading by failing to disclose that payments allegedly in violation of the FCPA had been made and by asserting that management had determined that its internal controls were effective. The plaintiffs seek awards of compensatory damages and restitution to us as a result of the alleged violations and their costs and attorneys’ fees, experts’ fees, and other litigation expenses, among other relief.

Agencies: United States: Department of Justice

Results: Declination, Disgorgement

Year Resolved: 2019

Compliance Monitor:

Ongoing: No

Details:

In September 2016, Cognizant voluntarily disclosed its potential FCPA violation in India to the SEC and U.S. Department of Justice ("DOJ"). Cognizant is cooperating fully with both agencies.

On 13 February 2019 - The DOJ declined prosecution of Cognizant based on various factors set forth by the DOJ’s Principles of Prosecution of Business Organizations and the Corporate Enforcement Policy, such as Cognizant’s voluntary self-disclosure of the bribery scheme, cooperation, remediation, and disgorgement to the SEC. Cognizant agreed to disgorge US$19.4 million to the DOJ, with a credit of the disgorgement amount to be paid to the SEC (exclusive of prejudgment interest).

On 15 February 2019, the DOJ indicted Cognizant former president Gordon Coburn and chief legal officer Steven Schwartz for conspiracy to violate the FPCA, violation of the FPCA, falsification of books and records, and failure to implement internal accounting controls regarding the bribery scheme in India.

 

Agencies: United States: Securities and Exchange Commission

Results: Cease-and-Desist Order, Civil Penalty, Disgorgement

Year Resolved: 2019

Compliance Monitor:

Ongoing: No

Details:

In September 2016, Cognizant voluntarily disclosed its potential FCPA violation in India to the SEC and U.S. Department of Justice ("DOJ"). Cognizant is cooperating fully with both agencies.

15 February 2019 - Cognizant Technology Solutions Corporation (“Cognizant”) reached a US$25 million settlement with the SEC via a consensual cease-and-desist order to resolve violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.

The violations stem from a 2014 – 2016 bribery scheme in which Cognizant executives in the United States and India authorized various contractors and third party vendors to pay approximately US$3.6 million in bribes on Cognizant’s behalf to Indian government officials. The bribes were in exchange for permits, clearances, and licenses in connection with the construction and operation of commercial office buildings in India. Cognizant officials paid commissions to some of the contractors for their role in the scheme and concealed the improper payments in its books and records via falsified contract change orders and false descriptions.  Cognizant received profits of approximately US$16.4 million as a result of the scheme.

The SEC found that Cognizant is liable for the conduct of its executives by respondeat superior, and that its internal accounting controls were not reasonably sufficient. In consenting to the cease-and desist order, Cognizant neither admitted nor denied the SEC’s findings.

 The SEC ordered Cognizant to pay approximately US$25 million, consisting of US$16.4 million in disgorgement, US$2.8 million in prejudgment interest, and a US$6 million civil monetary penalty. It also ordered Cognizant to take additional remediation efforts and to report its progress during a two-year period of review.

Agencies: United States: Securities and Exchange Commission

Results: Prosecution of Individuals

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

15 February 2019 - Two former Cognizant executives who orchestrated the bribery scheme– Gordon Coburn (former President) and Steven Schwartz (former chief legal officer) – were charged in a 12-count indictment for their role in the scheme.

16 September 2019 - Thiruvengadam settled with the SEC regarding charges of FCPA violation with a payment of US $50,000 and an agreement to cooperate.

ENTITIES / INDIVIDUALS INVOLVED
  • Cognizant Technology Solutions Corporation ("Cognizant")
  • Cognizant India (Indian subsidiary)
  • Gordon Coburn (former Cognizant President) - organizer of scheme
  • Steven Schwartz (former chief legal officer) - organizer of scheme
  • Sridhar Thiruvengadam (former chief operating officer of Cognizant) - organizer of scheme
Details Of How Conduct Was Discovered

Discovery Method: Voluntary Disclosure

Details:

In its Form 8-K filed with the SEC on 30 September 2016, Cognizant disclosed that it voluntarily disclosed its potential FCPA violation in India to the SEC and DOJ and they are cooperating fully with both agencies.

Country: India