New Delhi: The US Securities and Exchange Commission’s (US SEC’s) indictment against Gautam Adani and several others over allegations of bribery isn’t the first in recent times. There has been one other case in the last five years, involving another company that even paid a settlement of $25 million. Here, too, an Indian state government official was allegedly bribed.
Cognizant Technology Solutions Corporation in 2019 paid the SEC $25 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA)—the same allegations levelled against Adani and the others. The payment was also to settle charges that two of the company’s former executives facilitated the payment of “millions of dollars” in a bribe to officials in the governments of Tamil Nadu and Maharashtra.
According to the case document, reviewed by ThePrint, the crux of the allegations was based around the actions taken by Gordon J. Coburn, who was president of the company from 2012 to September 2016, and Steven E. Schwartz, who had been the company’s general counsel and secretary from 2007 till November 2013, and was the company’s executive vice-president and chief legal and corporate affairs officer from December 2013 to November 2016.
While Cognizant Technology Solutions is incorporated in the US, the bulk of its business is in India, through its subsidiary Cognizant Technology Solutions India Private Limited.
“In April 2014, Coburn and Schwartz authorized a contractor to pay a $2 million bribe on Cognizant’s behalf to a senior government official in the Indian state of Tamil Nadu with influence over the issuance of planning and building permits to obtain a required planning permit for construction of Cognizant’s KITS Campus in Chennai, the largest city in Tamil Nadu,” the document said.
The court document also said that, in order to secure the benefits sought by Cognizant, Coburn also allegedly promised and agreed to pay an additional $500,000 to the contractor for the payment of the bribe to the Tamil Nadu government official.
The Tamil Nadu government official remained unnamed. In addition, bribes totaling $1.6 million were allegedly made to an official in the Maharashtra government in Pune and to another official in the Tamil Nadu government in Siruseri.
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Construction before permit
According to the documents, Cognizant began construction on its 2.7 million square foot KITS Campus in Chennai—the largest company-owned facility in India—in 2011. This was before it applied for or received the required planning permit that would allow construction to be completed and the facility to be occupied.
It was only in February 2013 that the contractor hired for the job applied to the Chennai Metro Development Authority for the planning permit on Cognizant’s behalf.
According to the documents, it was a year later, in early 2014, that a Tamil Nadu government official demanded the $2 million bribe “as a condition for approving the issuance of the planning permit”.
During subsequent conversations within the company in April 2014, Coburn and Schwartz allegedly authorised the payment of $2 million to the contractor “to pay the bribe demanded by the government official”.
Bribes, threats and approval
The court documents further say that, to persuade the contractor to make the bribe payment on Cognizant’s behalf, Coburn directed the company’s real estate officer to inform the contractor that “Cognizant would withhold future payments related to the KITS Campus construction contract if Contracting Firm resisted paying the bribe”.
“Contracting Firm ultimately yielded to Cognizant’s demand, as directed by Coburn, and made the bribe payment through a consultant in late May or early June 2014,” the document said. “Coburn later authorised payment of an additional $500,000 to Contracting Firm for paying the bribe.”
This alleged bribe was successful, the document notes, in allowing Cognizant to receive the permit, and to also save on costs it would have incurred had the permit not come.
“On or about November 5, 2014, as a result of the corrupt payment from Contracting Firm on Cognizant’s behalf, the Chennai Metro Development Authority issued to Cognizant the required planning permit for the KITS Campus, thereby allowing completion of construction and occupancy of the facility,” the document notes.
“Issuance of the planning permit without further delay allowed Cognizant to avoid costs that it would have incurred in leasing facilities if the permit was not issued and the KITS Campus could not be occupied,” it added.
The document further noted, as Coburn and Schwartz and their colleagues had discussed over video calls earlier, the $2.5 million amount was disguised in the books of accounts through a series of fraudulent change orders submitted by the contractor and approved by Coburn during the completion of the KITS Campus. A change order is a document that modifies a construction contract.
Some more bribes
The document went on to document several other instances in which Cognizant officials allegedly paid bribes to receive permits.
The ‘bribe scheme’ in Pune also allegedly involved the same contractor and revolved around permits for the construction of a commercial official facility.
“Construction began in 2012, prior to the issuance of necessary permits,” the court document noted. “On this occasion, Cognizant India authorized Contracting Firm-1 to pay an Indian official $770,000 in return for issuing an environmental clearance. The payment was made in early 2013, and the environmental clearance was issued thereafter.”
Cognizant India allegedly reimbursed the contractor for the bribe payment in January 2014.
In Siruseri, Cognizant India allegedly authorised the same contractor to pay bribes totaling $840,000 to government officials for the issuance of several construction-related permits, including a planning permit, a power permit from the local electricity board, and an environmental clearance.
“Contracting Firm-1 made the payments in or around 2012, and Cognizant subsequently received the permits in the second half of that year,” the document said. “Cognizant India reimbursed Contracting Firm-1 for the bribe payments in installments between 2015 and 2016.”
Cognizant cooperates and settles charges
The SEC noted that Cognizant voluntarily disclosed the misconduct and shared the facts developed during the course of an internal investigation by the audit committee of its board. The company also cooperated by voluntarily producing and translating documents, and making current or former employees available for interviews by the SEC.
Cognizant also agreed to several other remedial measures including terminating or disciplining the officers and employees who participated in or were aware of the bribery and concealment, and appointing new executive personnel, including a new president, general counsel, and heads of global real estate and procurement, and paying a settlement.
“Cognizant Technology Solutions Corporation has agreed to pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA), and two of the company’s former executives were charged for their roles in facilitating the payment of millions of dollars in a bribe to an Indian government official,” the SEC said in a release dated 15 February 2019.
(Edited by Gitanjali Das)
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