A U.S. information technology company agreed to pay $25 million to settle SEC charges for violating the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act ("FCPA"). The SEC charged two of the company's former senior executives for allegedly facilitating a bribe to an Indian government official.
According to the SEC Order, Cognizant Technology Solutions Corporation ("Cognizant"), acting through its executives in the United States and India:
- authorized and reimbursed contractors to pay $3.6 million in bribes to Indian government officials to obtain government construction permits and operating licenses; and
- caused a third-party contractor to pay almost $3 million in bribes to Indian government officials for the issuance of a planning permit and environmental clearances to pursue multiple projects in India.
In addition, the Indian subsidiary allegedly authorized and reimbursed the same third-party contractor for roughly $870,000 in bribes paid to government officials for construction-related permits in India. As a result of the alleged misconduct, Cognizant received approximately $16.4 million in gains.
According to the SEC, the payments from Cognizant India's (Cognizant's largest subsidiary) bank accounts were not correctly reflected in Cognizant's consolidated books and records. In addition, Cognizant also failed to establish and maintain an adequate system of internal accounting controls.
Separately, according to the Complaint filed in the U.S. District Court for the District of New Jersey, the SEC alleged that Gordon J. Coburn, former Cognizant president, and Steven E. Schwartz, former chief legal and corporate affairs officer of Cognizant, authorized a contractor to pay the $2 million bribe on Cognizant's behalf to a senior government official in India. The two former executives also allegedly directed their subordinates to hide the bribe by doctoring the contract's change orders. The SEC asked that the Court, among other things, order them to pay a monetary penalty.
The DOJ separately announced its declination of charges against Cognizant under the FCPA Corporate Enforcement Policy. However, the DOJ indicted Mr. Coburn and Mr. Schwartz for violating the FCPA's anti-bribery and accounting provisions.
Commentary / Joseph V. Moreno
Despite the involvement of two key Cognizant executives in this alleged fraud, which is normally an aggravating factor under the FCPA Corporate Enforcement Policy, the DOJ declined to pursue charges against the company. This highlights even more the value clearly placed by the DOJ on taking timely and decisive action upon the discovery of FCPA violations which in this case included prompt self-disclosure, a thorough internal investigation, and disciplinary actions against employees. It will be interesting to note as the year progresses whether similarly-situated companies fare as well. The case is also a reminder that the technology sector is hardly immune from FCPA issues, and that legal and compliance professionals within the industry must remain vigilant as to how their employees and third-party service providers are conducting themselves in foreign markets.
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