Cognizant Technology Solutions Corp has reached a $95 million settlement to resolve the Cognizant India Bribery case/lawsuit. Shareholders accused the Company of defrauding shareholders by hiding bribes to officials in India for Special Economic Zones(SEZ), including its Indian headquarters Chennai, where it could enjoy tax and other benefits.
In a recent SEC filing, Cognizant said it would pay $95 million to investors who purchased Cognizant common stock between February 27, 2015, and September 29, 2016, inclusive of attorneys’ fees and litigation expenses settle the allegations.
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Cognizant filed a preliminary settlement of the proposed class action with the federal court in Newark, New Jersey. Without admitting guilt, the Company asks the U.S. District Court to approve the Settlement for the District of New Jersey.
Cognizant’s share price fell over 13% on September 30, 2016, after Cognizant announced that it was looking into bribery allegations and whether there were violations of the federal Foreign Corrupt Practices Act.
Cognizant shareholders accused the Company of failing to disclose payments made to obtain permits for facilities in “special economic zones,” including its Indian headquarters in Chennai, where it could enjoy tax and other benefits.
Cognizant already paid $25 million to settle a related U.S. Securities and Exchange Commission civil probe in February 2019.
Former president Gordon Coburn and former chief legal officer Steven Schwartz denied wrongdoing and expected insurers to cover most of the settlement payment. U.S. prosecutors charged Coburn and Schwartz with Foreign Corrupt Practices Act(FCPA) and other violations. Those criminal cases remain pending.
Cognizant India Bribery case and lawsuit
According to a report by WSJ, Sridhar Thiruvengadam, 55 years old Cognizant Executive, attended two videoconferences with three other Cognizant executives, where they decided to authorize a $2 million bribe to secure a planning permit for the office construction in Chennai, India.
Indian IT Blog team reviewed the original lawsuit and found below details on Cognizant Lawsuit:
- Between 2014 and 2016, Cognizant Executives authorized the contractors to pay $3.6 million in bribes to Indian government officials to obtain government construction-related permits and operating licenses in connection with the construction and operation of commercial office buildings.
- In 2014 Cognizant authorized a contractor to pay a $2 million bribe to a senior government official to issue a planning permit for a project in Chennai, India. The payment and a scheme to conceal a $2.5 million reimbursement to the contractor.
- In 2013 and 2014, Cognizant’s Indian subsidiary authorized the same third-party contractor to pay a bribe of approximately $770,000 to a government official for an environmental clearance for a project in Pune, India.
- The unlawful payments were paid from Cognizant India’s bank accounts and inaccurately reflected in Cognizant’s consolidated books and records.
Cognizant statement on lawsuit and Settlement
Without admitting guilt, the Company said this SettlementSettlement avoids any future liability or unpredicted consequences.
Cognizant said the Settlement is not an admission of liability by Cognizant but is instead to eliminate the future uncertainty, burden, and expense of further protracted litigation.
Cognizant is constantly in the news due to mass layoffs and many top-level executive exits; however, Company is continuing to win many multimillion deals.