September 10, 2021

Federal court grants preliminary approval of $95 million securities litigation settlement related to IT company’s FCPA violations

On September 9, 2021, the US District Court for the District of New Jersey issued an order granting preliminary approval of a $95 million settlement that was reached by Cognizant Technology Solutions Corporation, a New Jersey-based information technology services company, and investors in Cognizant.  The plaintiff investors alleged that Cognizant had defrauded them by filing with the SEC misleading and materially incomplete business and financial statements that did not disclose bribe payments in India and that misstated the strength of the company’s compliance program.  Under the terms of the proposed settlement that was filed with the court on September 7, 2021, the $95 million payment resolves allegations against all Cognizant defendants with prejudice, including Cognizant’s President Gordon Coburn, its CEO Francisco D’Souza, and its CFO Karen McLoughlin.  For purposes of the settlement, the plaintiffs also asked the court to certify a class consisting of all persons and entities who acquired Cognizant stock during the class period (February 27, 2015 through September 29, 2016).  The court stated as part of its order that it will likely be able to certify the proposed class.

The suit was filed on October 5, 2016 by lead plaintiffs Union Asset Management Holding AG, Amalgamated Bank, as Trustee for the LongView Collective Investment Funds, and the Fire and Police Pension Association of Colorado.  It came just a few days after Cognizant had disclosed in a Form 8-K filing that it was conducting an internal investigation regarding the legality of certain payments made in India.  In February of 2019, the DOJ declined to prosecute Cognizant due to the company’s prompt disclosure of the improper payments to federal authorities, its cooperation with DOJ and SEC investigators, and extensive remediation efforts.  Around the same time, Cognizant reached a settlement with the SEC, agreeing to pay approximately $25 million in civil penalties, disgorgement, and prejudgment interest.  Also in February 2019, Coburn and Chief Legal Officer Steven Schwartz were indicted by a federal grand jury for multiple FCPA violations based on their alleged involvement in a scheme to pay a $2 million bribe to at least one government official in India in exchange for a construction permit to build a large office campus in India.  In addition, the SEC brought a civil enforcement action against Coburn and Schwartz.  The DOJ and SEC cases against Schwartz and Coburn are ongoing.  

On June 5, 2020, almost four years after the shareholder suit was filed, the district court denied Cognizant’s motion to dismiss.  The preliminary settlement comes roughly 2.5 years after the company settled with the DOJ and the SEC and almost five years after the case began.  A hearing to determine the adequacy and reasonableness of the settlement terms will be held on December 20, 2021.  

Order preliminarily approving settlement | Memo in support of motion for preliminary approval of settlement | Docket Entry