Cognizant Technology Solutions on Friday said it was investigating bribery deals involving its India facilities that might have violated the US Foreign Corrupt Practices Act. The software services firm also appointed a new president. The Cognizant stock crashed over 12 per cent as it opened on the Nasdaq Stock Exchange, where it is listed, on Friday.
“The company is conducting an internal investigation whether certain payments relating to facilities in India were made improperly and also for possible violation of the US Foreign Corrupt Practices Act and other applicable laws,” Cognizant said in the regulatory filings.
It said the investigations were at an early stage and so couldn’t define the material impact. “The investigation is being conducted under the oversight of the audit committee, with the assistance of an outside counsel, and is currently focused on a small number of company-owned facilities.” The disclosure of internal investigations of corruption comes on a day it appointed IT services head Rajeev Mehta as president. Cognizant announced the resignation of Gordon Coburn as president, but did not cite any reason. It disclosed the corruption probe to the US Securities and Exchange Commission and the US Department of Justice, but remained silent on the development in a press statement.
Coburn, a Cognizant veteran who has been with the company since inception, has held several finance roles, including chief financial officer, before being elevated as the president in 2012. The US-based Cognizant, which has four of every five employees based offshore in countries such as India, did not disclose whether his abrupt exit was linked to the probe.
On the probe, the spokesperson said, “It’s an ongoing internal investigation and we can’t comment further on any aspect of it. Cognizant is a strong company and our fundamentals remain strong. As you know, we do great work. We uncovered this situation through our own compliance processes, voluntarily reported it to the government, and are fully cooperating with them. We are conducting a full investigation, under the oversight of the Audit Committee of the Board of Directors, with the help of outside counsel.”
The corruption investigation comes at a time when Cognizant is facing headwinds in the financial services and health care verticals, as customers have cut or cancelled projects. Last month, it cited these reasons to cut its annual forecast for the second time to 8.5-9.5 per cent for the current financial year. Cognizant follows the January-to-December financial year.