Cognizant Finds ‘Improper Payments’ Of $5 Million Made In India
U.S.-based Cognizant on Monday disclosed that it has identified "potentially improper payments" worth $5 million being made for company-owned facilities in India and that certain members of its senior management may have been "aware" or "participated" in matters under probe.
In September, Cognizant had said it was conducting an internal investigation into possible violations of the U.S. Foreign Corrupt Practices Act amid allegations that the IT major had made "improper payments to obtain permits and building licences in India".
At present, the investigation has identified a total of approximately $5 million in potentially improper payments for certain company-owned facilities in India... we determined that it was appropriate at this time to record an out-of- period correction of $3.1 million related to certain of these payments.Karen McLoughlin, CFO, Cognizant
Cognizant CEO Francisco D'Souza said during the course of the investigation it was found that "certain members of senior management may have been aware of or participated in the matters under investigation".
"Based on the results of the investigation to date, those who may have been involved are no longer with the company or in a senior management position," he added.
McLoughlin clarified that these members may have participated in or failed to take action to prevent the making of the said payments by either overriding or failing to enforce the controls established by the company.
The IT company faces potential legal action in the U.S. with law firms like Holzer & Holzer LLC and Glancy Prongay & Murray LLP inviting investors to join the class action lawsuit in case they had suffered losses after Cognizant's shares tanked in the aftermath of the September disclosure.
Stating that the company is fully cooperating with the U.S. Department of Justice and the Securities and Exchange Commission, D'Souza said Cognizant has "already started and will continue to enhance internal controls and compliance programs."
McLoughlin said the company has already taken and continues to take "remediation measures" in the areas of procurement and accounts payable as they relate to real estate transactions in India.
Also Read: Cognizant Trims Full-Year Revenue Growth Guidance For The Third Time This Year
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