Tuesday, October 27, 2020

Ex-Cognizant COO to pay $50,000 fine in bribery case

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Former Cognizant COO Sridhar Thiruvengadam has agreed to pay a civil penalty of $50,000 following the latest Securities and Exchange Commission (SEC) order that found that four Cognizant executives, including Thiruvengadam, met by video-conference to authorize the bribe payment that violated the Foreign Corrupt Practices Act (FCPA).

The case dates back to Cognizant’s 2.7 million sqft KITS campus on Old Mahabalipuram Road in Chennai that planned to employ 17,500 people. A senior government official of Tamil Nadu demanded a $2 million bribe from the construction firm responsible for the campus.

The bribery scheme exposed the company to serious civil and criminal liability, in connection with which it has had to pay $25 million in penalties, as well as incur $79 million more in costs related to its internal investigation.

The latest SEC order said Thiruvengadam devised a scheme to cover it up in the company’s books. Thiruvengadam was Cognizant’s chief operating officer from late 2013 until he was placed on administrative leave in late 2016. Cognizant accepted Thiruvengadam’s resignation last year.

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The SEC order states that Thiruvengadam later helped to conceal the payment by signing false sub certifications. It found that Thiruvengadam violated the FCPA’s internal accounting controls and record-keeping provisions. “Without admitting or denying the findings, Thiruvengadam agreed to pay a civil penalty of $50,000,” the order said.

A lawsuit filed by a group of investors on July 27 had put the spotlight on two of its former top executives – former president Gordon Coburn and former chief legal officer Steven E Schwartz. Coburn and Schwartz channelled payments to L&T, the construction company responsible for the KITS campus.

The lawsuit alleged that to disguise Cognizant’s repayment to L&T of the bribes the latter paid to government officials, Schwartz and Coburn agreed that L&T would submit many fraudulent change order requests at the end of the project totalling $2 million.

TOI has seen the copy of the order that said Cognizant engaged the contracting firm to build the facility and obtain all necessary government permits.

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Construction began in 2011 prior to the issuance of a required planning permit. The sub-certifications falsely denied that Thiruvengadam was aware of any fraud involving senior management.

The subcertifications were relied upon by Cognizant’s chief executive officer and chief financial officer in signing management representation letters given to Cognizant’s outside auditor. “The outside auditor relied on management’s representations in opining on Cognizant’s financial statements,” the order said

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