Blog Coverage Cognizant to Investigate Payments Related to its Indian Arm

LONDON, UK / ACCESSWIRE / October 3, 2016 / Active Wall St. blog coverage looks at the headline from Cognizant Technology Solutions Corporation (NASDAQ: CTSH) as the company announced that it is investigating for possible violation of a federal anti-foreign-corruption act with regards to payment made to its Indian arm. In another development, the company informed that its president had resigned citing no reason. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The tech giant informed on September 30th, 2016 that it has notified the US Department of Justice (the “DoJ”) and Securities and Exchange Commission (the “SEC”) that is was conducting an internal probe to ascertain if the payments made to facilities in India were made improperly and did not abide by the US Foreign Corrupt Practices Act. In its filling, the company informed that the investigation is being shepherded by the audit committee and is being assisted by an outside counsel.

The company stated that it has voluntarily informed the DoJ and the SEC about the investigation and is fully cooperating with both agencies. This development comes after the new program rolled out by the DoJ in April 2016, which provided for deep discounts to the companies that cooperate with government agencies to fight corruption including those on foreign soils and help a crackdown on individuals and uncover bribery violation.

Under Radar

The company is currently investigating on the certain factions of the company-owned facilities in India, which had popped up during internal checks. Cognizant has 45 facilities in India of which 12 are owned.

The spokesperson for Cognizant stated that those laptops of several senior level management personnel, including members’ part of the board, have been seized as the part of investigation. The company’s representative also stated that the investigation was in its initial stage so any further details cannot be revealed; he also emphasized that any comments on rumors and speculation is unwarranted.

The Teaneck, New Jersey-based company has about 244,300 employees, in which every four of every five employees based offshore in countries such as India.

Eyebrows were also raised after the resignation of the company’s president, Gordon Coburn, at a time when major corruption charges have been leveled against the company. Rajeev Mehta, the head of IT services, will now serve as the new president of the company. Gordon Coburn had been with Cognizant since its inception and had held several positions in the company including the CFO before he took charge as president of the company in 2012.

A company’s spokesperson said of the resignation and the interim leadership:

“It was Gordon’s decision to resign. Raj is a proven leader with strong client relationships forged over 20 years with the company and has been responsible for leading our market-facing and delivery teams in driving industry-leading growth.”

Bad Times

The corruption charges against the company come at times when the company is facing headwinds in its business, particularly in its financial services and health care segments. In its previous earnings release, the company had truncated its annual growth forecast for the second time in a row to 8.5% to 9.5% for the ongoing fiscal year, citing cut or cancellations of projects by the customer.

Not the First

This is not the first time that corruption and bribery charges have been levied against any company. The US government agencies are investigating possible foreign bribery charges against Wal-Mart; however any fine or settlement has not been levied.

Siemens AG was found guilty in worldwide bribery charges and was asked to pay $350 million to settle SEC’s charges, and a $450 million fine to the DoJ. Furthermore in 2014, Alstom SA pleaded guilty in foreign bribery charges and was order to pay $772 million as fine to the DoJ to resolve criminal charges levied against it.

Stock Performance

Last Friday, Cognizant Technology Solutions’ shares was tumbled 13.25%, finishing the day at $47.71 with volume of 53.22 million shares exchanging hands by the close of the trading session, which was above the 3-month average volume of 4.18 million shares. Shares of the company have a PE ratio of 19.28 and market cap of $28.96 billion at the end of September 30th session.

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