Cognizant widens bribery probe

The scope of investigation that software services provider Cognizant Technology Solutions initiated against bribery charges involving facilities in India may widen to the involvement of its officials locally who do such transactions.

According to sources, a few more senior officials based in India are likely to come under the company's investigation in connection with certain payments related to the company-owned facilities in India. Cognizant owns 12 of the 45 facilities it has in India, where majority of its employees are located. As of June 2016, company's global headcount was around 2,44,300, of which around 75 per cent are in India.

 

However, the company said that the investigation, in its early stages now, is currently focused on a small number of the company-owned facilities in India.

"The investigation is focused on improper payments such as building licenses, permits, etc," it said in an email response.

US-based Cognizant follows the offshore model similar to that of Indian IT service providers such as TCS and Infosys. It has four out of its five employees based in offshore locations such as India, delivering services to its global clients.

Cognizant, which follows the January to December financial year, reported $12.42 billion in 2015 and is second only to TCS with $16.54 billion in revenue.

The Friday announcement of both the bribery investigations and sudden exit of company loyalist and President Gordon Coburn took investors by surprise, which led the stock to drop 13.5 per cent. Investors lost $4.5 billion on that day.

Cognizant's announcement of its new President, Rajeev Mehta, who was elevated from his previous role as the CEO of IT services did not soothe investors.

The company informed the US Securities and Exchange Commission (SEC) that it is conducting an internal investigation into whether certain payments relating to facilities in India were made improperly and in possible violation of the US Foreign Corrupt Practices Act and other relevant laws.

Cognizant sources said that the lawyers from a US firm has visited Chennai recently to investigate details of some of the deals related to setting up of its development centres in India.

"As the investigation is ongoing, we cannot go into any other details or respond to market rumours and speculation," said the company in an e-mail response.

The investigation is being conducted under the oversight of the audit committee, with the assistance of outside counsel. The company has voluntarily notified the United States Department of Justice (DOJ) and United States SEC and is cooperating fully with both agencies, it said in the regulatory filing on Friday.

The internal investigation is in its early stages, and the Company is not able to predict what, if any, action may be taken by the DOJ, SEC or any governmental authority in connection with the investigation or the effect of the matter on the Company's results of operations, cash flows or financial position, it added.

IN CHOPPY WATERS

• Sources said more company executives based in India were likely to be probed over certain payments
   
• Friday’s announcement of investigations and the sudden exit of Cognizant President Gordon Coburn took investors by surprise
   
• The company’s stock dropped 13.5 per cent and investors lost $4.5 billion in a day