Cognizant to pay $25M to settle civil case related to former executives' bribery scheme

Legal Review
Former company president Gordon Coburn and former chief legal officer Steven Schwartz were indicted on criminal charges of violating and conspiring to violate the Foreign Corrupt Practices Act’s anti-bribery and accounting provisions. (Getty Images/BrianAJackson)

Cognizant Technology Solutions Corporation will pay $25 million to settle federal civil charges related to improper payments to obtain permits and building licenses in India carried out by two former top executives five years ago.

Those two former executives were indicted by a federal grand jury in Newark, New Jersey, on Friday for their role in the alleged bribery scheme, according to an announcement by the U.S. Department of Justice and the U.S. Attorney's Office for the District of New Jersey.

Gordon Coburn, the former company president, and Steven Schwartz, the former chief legal officer, were indicted on criminal charges (PDF) of violating and conspiring to violate the Foreign Corrupt Practices Act’s (FCPA) anti-bribery and accounting provisions. The charges stem from an alleged scheme to bribe government officials in India to secure a construction permit necessary to complete the development of an office campus that would become one of Cognizant’s largest facilities in India, according to U.S. authorities.

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

“The allegations in the indictment filed yesterday describe a sophisticated international bribery scheme authorized and concealed by C-suite executives of a publicly-traded multinational company,” Assistant Attorney General Brian Benczkowski said in a release. “The indictment of Gordon Coburn and Steven Schwartz demonstrates the Department’s commitment to relentlessly pursuing corporate fraud and corruption wherever it is found.”

Cognizant is an IT services and consulting company, including healthcare technology solutions, based in Teaneck, New Jersey, but with the majority of its employees working in India. The case is assigned to U.S. District Judge Kevin McNulty of the District of New Jersey. 

Coburn and Schwartz were charged in a 12-count indictment with one count of conspiracy to violate the FCPA  and other offenses.

RELATED: Investors say DOJ is investigating Outcome Health for fraud

In a related civil case (PDF) with the U.S. Securities and Exchange Commission, Cognizant entered into a cease-and-desist order and agreed to pay $25 million to settle charges that the company violated the FCPA. The SEC also filed a civil complaint (PDF) against Coburn and Schwartz.

The SEC’s complaint alleges that in 2014, Coburn and Schwartz authorized a payment of $2 million to a senior Indian government official to push through the necessary permit to build the company’s new 2.7-million-square-foot campus in Chennai, India.

The DOJ and SEC complaints allege that the two former executives authorized the contractor to pay the bribe and then reimbursed the construction company through phony construction invoices at the end of the project. The $2 million bribe payment was disguised as payment for cost overruns on the office campus, the DOJ alleges. In connection with this scheme, Coburn and Schwartz falsified Cognizant’s books and records and also circumvented and failed to implement its internal controls, according to the DOJ complaint.

The SEC also alleges that Cognizant authorized the construction firm to make two additional bribes totaling more than $1.6 million. Cognizant allegedly used sham change order requests to conceal the payments it made to reimburse the firm, the SEC said in a press release.

“Bribery to further corporate goals is an illusory path to long-term success,” Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit, said in the release. “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.”

In a company press release, Cognizant Vice Chairman and CEO Francisco D’Souza said company leadership voluntarily notified U.S. authorities of the potential issues in India more than two years ago, and the company cooperated with the SEC and DOJ investigations.

“We undertook a comprehensive internal investigation under the oversight of the Audit Committee of the Board of Directors, with the assistance of outside counsel. We have also made further enhancements to our compliance processes, procedures, and resources. It is important to note that this entire matter did not involve our work with clients or affect our ability to provide the quality services our clients expect from us,” D’Souza said.

Cognizant said the settlement “resolves all of the DOJ and SEC investigations into the company concerning this matter.”

The DOJ said it is not pursuing criminal charges against Cognizant due to the company’s “prompt voluntary self-disclosure, cooperation, and remediation, as well as Cognizant’s disgorgement to the Department and the U.S. Securities and Exchange Commission (SEC) of the cost savings that resulted from the bribery scheme.”

The civil penalty that Cognizant agreed to pay includes disgorgement and prejudgment interest of approximately $19 million and a penalty of $6 million.

According to the Economic Times, in a recent letter to Cognizant employees, D’Souza reiterated the company’s “zero tolerance” for illegal and improper conduct. Regarding the case against the two former executives, D’Souza said “these cases are a matter between the government and these individuals and the charges against them will be addressed by the court system,” according to the Economic Times.

Suggested Articles

A group of House lawmakers want CMMI's mandatory kidney care model to be as narrow as possible and change how it calculates payments.

Humana and Microsoft announced a seven-year strategic partnership to build predictive solutions and intelligent automation to support Humana members.

Humana filed suit Friday against more than a dozen generic drugmakers alleging the companies engaged in price fixing.