Investigation, legal expenses towards FCPA violation costs Cognizant $63 mn

Company said costs towards FCPA violation in 2017 alone was $36, more expenses to incur in 2018

Nasdaq-listed IT services company Cognizant has said that the investigation and legal expenses towards the alleged violation of the US Foreign Corrupt Practice Act (FCPA) towards improper payments made in India has cost the company total $63 million so far in calendar 2016 and 2017.
 
In September 2016, the Cognizant had voluntarily disclosed before the US Department of Justice and the Securities and Exchange Commission (SEC) that the company was investigating payments related to company-owned facilities in India that were possibly made improperly and in violation of FCPA and other applicable laws. The disclosure was also followed by the exit of the then president Gordon Coburn, widely seen as a fallout of the investigation.

 
In its annual filing with US market regulator Securities and Exchange Commission on Wednesday, Cognizant said it was expecting to incur more expenses towards the investigation and lawsuits related to the investigation. “In 2017, we incurred $36 million in costs related to the FCPA investigation and related lawsuits in addition to the $27 million we incurred in 2016. We expect to continue to incur expenses related to these matters in 2018,” it said.
 

The expenses towards the investigation and associated expenses are also proving to be a costly affair for the company given that so far it has identified only around $6 million in payments made between 2009 and 2016 which could be improper.

 
“The outcome of the putative class action litigation, derivative lawsuit, or any other litigation is necessarily uncertain. We could be forced to expend significant resources in the defence of these lawsuits or future ones, and we may not prevail,” the company added in the statutory regulatory filing.
 
The company said that it is fully cooperating with the US Department of Justice and SEC in the investigation process which is being conducted under the oversight of the Audit Committee with the assistance of outside counsel.
 
We had approximately 260,000 employees at the end of 2017, with approximately 50,400 in North America, approximately 13,800 in Europe and approximately 195,800 in various other locations throughout the rest of world, including 180,000 in India. We are not a party to any significant collective bargaining agreements. We consider our relations with our employees to be good.

 
Teaneck-headquartered Cognizant employs 260,000 people globally of which a vast majority of 180,000 are located across its different centres in India.