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Cognizant Technology’s (NASDAQ:CTSH) Case Shows That Senior Leadership Could Be Held Culpable Of Wrongdoing Rather Than The Firm

Cognizant Technology Solutions Corp’s (NASDAQ:CTSH) lost 1.01% in the last trading session to close at $71.31. Here is latest update on the company.

Cognizant case demonstrates that a company can avert criminal charges in the event its C-Suite gets involved in wrongdoing.

Last week former Cognizant chief legal officer and the ex-president were charged for their alleged involvement in the approval of illicit payments to aid the construction of a corporate campus in India. The two former executives were in charge of Cognizant’s compliance program at the time.

No criminal charges for Cognizant

The company will not face criminal charges after agreeing to pay $25 million in civil penalties and disgorgement to settle its role in the suit. According to the Department of Justice, Cognizant avoided the charges because the company had voluntarily disclosed the issue within two weeks of being aware of it. In a statement, the prosecutors indicated that the remediation, cooperation, the internal investigation of the company as well as the effectiveness of its compliance program were vital in reaching a decision. The company will, however, continue to cooperate with the Department of Justice as investigations into the matter continue.

The Justice Department indicates that the decision not to prosecute is consistent with corporate enforcement policy in which companies caught in bribery case can avoid charges in the voluntarily disclose information on such matters

Executives won’t avoid charges

The attorneys of the two executives have indicated that they will fight the charges. Historically prosecuting C-suite leaders involves ion crimes such as bribery allegations have been difficult because of inadequate evidence associating them to wrongdoing. According to Kathleen Haman, a former prosecutor, the CEO does not send emails so they may not be liable for wrongdoing.

Normally in cases involving foreign bribery, it is the company that enters settlements to pay fines while top leadership avoids charges. However, the trend is changing with the Justice Department directing prosecutors to target implicated individual, but often the charges have stuck to mid-level employees. In the Cognizant case, the senior management is said to have directed the bribery scheme, and this was insufficiently pervasive to open charges against the company.

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