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Business Crimes Hotline
Former Cognizant Technology COO Settles FCPA Case In Relation to India Office Construction Project
Sridhar Thiruvengadam, the former chief operating officer for Cognizant Technology Solutions (Cognizant), has reached a settlement with the U.S. Securities and Exchange Commission (SEC) in connection with a bribe paid to expedite a large construction project in India and his role in the related cover-up. Cognizant, a NJ-based global technology and consulting services company, has more than half of its staff located in India. The project related to the planned construction of a vast office campus in Chennai that was to cover 2.7 million square feet and cater to approximately 17,500 employees.
According to the SEC's Administrative Order released on Sept. 13 2019, Mr Thiruvengadam, an Indian national and resident who had been with the company for over two decades, caused the company to violate the Foreign Corrupt Practices Act's (FCPA) internal accounting controls and recordkeeping provisions. Without admitting or denying the SEC's findings, Mr Thiruvengadam agreed to pay a $50,000 civil penalty and to cooperate fully with the Commission in any related proceedings. In parallel, the U.S. Department of Justice (DOJ) continues to pursue criminal charges against Cognizant's former President and General Counsel. This follows the company's February 2019 settlement with the SEC, in which it agreed to pay $25 million to settle related charges.
Mr Thiruvengadam was appointed as Cognizant's COO in late 2013, having advanced through the company after first joining in 1994. According to the SEC, he was one of four company executives who participated in a scheme to bribe a government official in Tamil Nadu, a South Indian state, after the official demanded a $2 million (U.S.) payment in exchange for assisting the company to obtain the necessary building permits. The project was facing delays as construction had commenced in 2011 without the necessary approvals in place. According to the SEC, in order to conceal the payment, it was made via a third-party construction firm already engaged on the project. It was planned that the construction firm would be reimbursed for the bribe and also receive a $500,000 commission for their role via a series of fake change order requests on existing contracts.
According to the SEC, authorization for paying the bribe and the plan to disguise it were arranged in detail via two video-conferences in which four Cognizant executives, including Mr Thiruvengadam, participated. Once the payment was made sometime in late May or early June 2014, the planning permit was received shortly thereafter in November of that year. According to the SEC, Mr Thiruvengadam made no objection to the proposed scheme and later attempted to conceal the payment by signing false management sub-certifications in connection with Cognizant's financial audits in the years from 2014-2016. In these sub-certification letters, relied upon by the company's CEO and independent auditors in their review of the company's accounts, Mr Thiruvengadam falsely stated he was not aware of any fraud involving the company's senior management.
"Thiruvengadam caused Cognizant's violations of [the FCPA] because, as chief operating officer, he was made aware of weaknesses in Cognizant's accounting controls environment and, rather than taking steps to remediate those weaknesses, he participated in a scheme that exploited them," the SEC stated. Mr Thiruvengadam was placed on administrative leave by Cognizant in late 2016 before resigning in 2018.
As part of its 2019 settlement, Cognizant agreed to pay a total of $25 million, comprising disgorgement and prejudgment interest of approximately $19 million and a civil penalty of $6 million. The DOJ issued a declination to the company, noting that despite the fact that certain members of senior management had participated in and directed the conduct in issue, the company had swiftly disclosed the matter, cooperated fully with the government, terminated relevant employees and contractors and had enhanced its compliance program and financial controls. The company's former Chief Legal Officer and its ex-President are still facing multiple civil and criminal charges on related allegations.
The case is In the Matter of Sridhar Thiruvengadam, No. 3-19446, before the Securities and Exchange Commission. The Administrative Order is available for download here.
— Juliet Gunev, Mayer Brown LLP
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