One of the difficult issues in many foreign bribery cases is establishing involvement by the parent company and senior officials. The local in-country subsidiary is typically on the front line. Executives on site deal with the local officials. The bribes are often demanded and paid at that level. In some instances, however, the evidence trail leads right to the top of the organization. That is the case in the SEC’s most recent FCPA action. There the President and the Chief Legal Officer approved the scheme. There the cover-up was approved at the top of the company. There the company settled with the Commission while the two former executives are litigating with the agency and the Department of Justice. In the Matter of Cognizant Technology Solutions Corporation, Adm. Proc. File No. 3-19000 (Feb. 18, 2019).
New Jersey based Cognizant, whose shares are listed on Nasdaq, is a global provider of information technology and business process services. Its largest subsidiary is located in India. Beginning as early as 2012, and continuing through at least early 2016, Cognizant, and Cognizant India, payed illegal bribes and took steps to conceal that conduct until the firm finally informed the staff, according to the Commission’s Order.
First, beginning as early as 2011, and continuing for the next few years, the firm was engaged with planning and constructing a new campus in Chennai, India. The plan was to construct 2.7 million square feet with a capacity for over 17,000 employees. The firm used Contracting Firm-1 for the project.
As the project moved forward in 2014, a firm officer learned that an Indian government official required that the contracting firm pay a $2 million bribe as a condition of issuing the planning permit. Ultimately the firm’s President, Gordon Coburn, and Chief Legal and Corporate Affairs Officer, Steven Schwartz, approved the payment of the bribe through Contracting Firm-1, according to the SEC’s allegations. The contractor, who initially balked at making the payment, would be given $500,000.
A series of false invoices from the contractor were constructed to conceal the payments. False supporting excel spread sheets were created. The President approved the payments beginning in March 2015 and continuing through January 2016.
Second, the firm was constructing a commercial office facility in Pune, India. Work began in 2012 prior to the issuance of the necessary permits. Cognizant India authorized Contracting Firm-1 to pay an Indian official $770,000 in return for issuing an environmental clearance. The contracting firm sought and eventually obtained reimbursement through a change order request.
Third, additional construction was undertaken in Siruseri, India. There Cognizant India authorized Construction Firm-1 to pay bribes totaling about $840,000. The bribes were paid to secure a power permit from the local electricity board and an environmental clearance in 2012. Again the contractor was reimbursed, eventually through change order requests.
Finally, Cognizant India paid about $27,000 in bribes to government officials for the purpose of obtaining certain operating licenses at six Indian facilities. Those payments were made between 2013 and 2016, typically to lower and mid-level employees. The Order alleges violations of Exchange Act Sections 13(b)(2)(A), 13(b)(2)(B) and 30A.
In accepting Respondent’s offer to settle the Commission considered the fact that the firm self-disclosed, cooperated and undertook remedial acts. The company voluntarily disclosed the misconduct and cooperated with the staff. It also terminated or imposed other discipline on those involved, appointed new executive personnel and enhanced its compliance function and FCPA policies. The firm also agreed to a series of undertakings keyed to future cooperation with the agency.
To resolve the proceedings Respondent consented to the entry of a cease and desist order based on the sections cited in the Order. In addition, the firm will pay disgorgement of $16,394,351, prejudgment interest of $2,773,017 and a penalty of $6 million. See Lit. Rel. No. 24402 (Feb. 15, 2019); see also SEC v. Coburn, Civil Action No. 2:19-cv-05820 (D.N.Y. Feb. 15, 2019); U.S. v. Coburn, No. 2:19-cr-00120 (D.N.J. Filed Feb. 15, 2019). The DOJ declined prosecution as to the company.