Past Cognizant Tech President and top Legal Officer indicted for $2 million bribes of Indian officials and Cognizant fined $25 Mill.

The former President and the former Chief Legal Officer of Cognizant Technology have been indicted for paying approximately $2 million through company employees and agents, to government officials in India to secure obtain required permits on an office park. There were also other payments in connections with other projects. The the Cognizant President Gordon Coburn and Chief Legal Officer Steven Schwartz allegedly authorized a contractor to pay the bribes and directed subordinates to conceal it. Congnizant agrees to disgorge $19 million and pay a penalty of $6 million.

To conceal the scheme, Coburn, Schwartz and others allegedly agreed that a third-party construction company would obtain the permit by making the illegal bribe payment and that Cognizant would reimburse the construction company through phony construction invoices at the end of the project.  The indictment  alleges that in or about late June 2014, after the co-conspirators had agreed that the construction company would make the bribe payment on behalf of Cognizant, the construction company secured the necessary government order for Cognizant to obtain the permit, allowing Cognizant to complete the development of the office campus and avoid millions of dollars in costs.  Months later, the co-conspirators are alleged to have knowingly caused Cognizant to funnel over $2 million to the construction company disguised as payment for cost overruns on the office campus when they knew that the actual purpose of the payment was to reimburse the construction company for the bribe payment.  According to the indictment, as Coburn, Schwartz and others had previously agreed, they hid the bribe reimbursement payment within a series of line items in a construction change order request to be paid to the construction company, thereby concealing the true nature and purpose of the reimbursement, falsifying Cognizant’s books and records, and circumventing and failing to implement its internal controls.

Gordon Coburn, 55, of Beaver Creek, Colorado, and Steven Schwartz, 51, of Greenwich, Connecticut, were charged in a 12-count indictment with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), three counts of violating the FCPA, seven counts of falsifying books and records, and one count of circumventing and failing to implement internal accounting controls.  The charges stem from an alleged scheme to bribe one or more government officials in India to ensure the issuance of a construction permit necessary to complete the development of an office campus that would support thousands of employees and become one of Cognizant’s largest facilities in India.

The case is assigned to U.S. District Judge Kevin McNulty of the District of New Jersey.  The defendants are scheduled to appear this afternoon before U.S. Magistrate Judge Mark Falk in Newark federal court.

The Department of Justice declined prosecution of Cognizant based on the facts that the company self-disclosed and conducted a thorough investigation. It also cooperated fully in DOJ’s investigation and it resolved the SEC’s action by agreeing to pay the $25 million noted above.