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Cognizant Technology has agreed to pay $25 million (Rs.178 crore) to settle SEC’s bribery charge

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Cognizant agrees to pay $25 million to settle SEC’s bribery charge

The US regulator said two former executives were charged for facilitating payments of millions of dollars.

By Reena Zachariah, ET Bureau

Mumbai: US-based Cognizant Technology Solutions has agreed to pay $25 million (Rs 178 crore) to settle charges towards violation of the Foreign Corrupt Practices Act (FCPA), the Securities and Exchange Commission (SEC) said.

The US regulator said Friday that two former Cognizant executives were charged for their roles in facilitating payments of millions of dollars in bribe to an Indian government official.

The SEC alleged that in 2014, a senior government official from Tamil Nadu demanded a $2-million bribe from a construction firm responsible for building Cognizant’s 2.7-million-sq-ft campus in Chennai.

Cognizant president Gordon Coburn and chief legal officer Steven E Schwartz authorised the contractor to pay the bribe, and directed their subordinates to conceal the bribe by doctoring the contractor’s orders, the SEC said. It also alleged that Cognizant authorised the construction firm to make two additional bribes totalling more than $1.6 million. The IT company allegedly used sham change order requests to conceal the payments it made to reimburse the firm.

“Bribery to further corporate goals is an illusory path to longterm success. While always the wrong choice, it is particularly egregious when senior executives chart that course for those they lead, as our complaint alleges here. We are committed to holding them accountable for their actions,” said Charles E Cain, chief of the SEC Enforcement Division’s FCPA Unit.

“With today’s announcements, we’ve taken a major step forward in putting this behind us. We have learnt from it and we must now move forward,” Cognizant chief executive Francisco D’Souza wrote in a mail to employees.

“It’s worth noting that this matter does not involve our work with clients and has not had an impact on our ability to provide the quality services our clients expect from us. I’d ask you all to now continue to remain focused on delivering to our clients in our usual, high quality way,” he wrote.

The Department of Justice and the US Attorney’s Office for the District of New Jersey announced the indictment of Coburn and Schwartz on criminal charges of violating and conspiring to violate the FCPA’s anti-bribery and accounting provisions.

In the past, the SEC had slapped a penalty of $16 million on alcoholic beverages company Diageo for bribing officials in Asia, including India. CASE DETAILS: The Cognizant case relates to the period between 2014 and 2016. In 2014, Cognizant authorised a contractor to pay a $2 million bribe to a senior government official for the issuance of a planning permit for a project in Chennai.

The payment, along with a scheme to conceal a $2.5 million reimbursement to the contractor, was authorised by two senior executives at Cognizant’s US headquarters.

In 2013 and 2014, Cognizant’s Indian subsidiary authorised the same third-party contractor to pay a bribe of about $770,000 to a government official for an environmental clearance for a project in Pune.

In 2015, the Indian subsidiary retroactively authorised and reimbursed the same third-party contractor for about $870,000 in bribes that it had paid to government officials for construction-related permits in Siruseri, Tamil Nadu. Cognizant received ill-gotten gains of about $16,394,351 as a result of the conduct, the SEC said.

The unlawful payments were paid from Cognizant India’s bank accounts and were not accurately reflected in Cognizant’s consolidated books and records. During the relevant period, Cognizant also failed to devise and maintain a sufficient system of internal accounting controls.

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