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MLATs: They Are Not Just For DOJ Any More (Maybe)

MLAT

Today’s post is from Sara Kropf. A shorter version of this post was published by Bloomberg News on May 14, 2024. (See here).

I’ve written before about the Department of Justice’s questionable tactics in an FCPA case against two former executives for Cognizant Technology Solutions. The two executives eventually lost their bid to suppress certain statements made during an internal investigation interview by the company.  But they continue to battle DOJ. Their efforts led the trial judge to take the extraordinary step of effectively forcing DOJ to help the defense secure exculpatory overseas evidence through a mutual legal assistance treaty or MLAT.

The case is an example of how a trial judge can exercise discretion to help ensure a fair trial simply by refusing to take what DOJ lawyers say at face value. It’s also a master class in persistent lawyering; by refusing to abandon the battle to obtain this key evidence, the defense may win the war.

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“That Cognizant Was Acting In Furtherance Of Generally Applicable Government Policies Does Not Render All Of Its Actions State Actions”

Judicial Decision

As highlighted in this prior post, in connection with the Cognizant Technology Solutions Foreign Corrupt Practices Act enforcement action concerning obtaining various permits in India, in early 2019 the DOJ (and SEC) also charged Gordon Coburn (former President and CFO of the company) and Steven Schwartz (former Executive Vice President and Chief Legal and Corporate Affairs Officer) with various FCPA offenses.

As highlighted in this prior post, in late 2022 the individuals filed motions claiming that the government outsourced its investigation to Cognizant.

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FCPA Related Caremark Claim Dismissed

Dismissed

As highlighted here, in 2019 Cognizant Technology Solutions resolved a $25 million SEC FCPA enforcement action in connection with various licenses and permits in India.

As often happens in the aftermath of Foreign Corrupt Practices Act scrutiny or enforcement, plaintiff lawyers representing shareholders filed related civil claims.

Several related derivative actions against current and former members of Cognizant’s board as well as current and former Cognizant executive officers were filed and consolidated into one action.

Recently, the court dismissed the consolidated actions (see here) and in doing so concluded, among other things, that plaintiffs’ so-called Caremark claims were not viable.

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Cognizant’s $95 Million Ripple

Ripple

Foreign Corrupt Practices Act settlement amounts are one obvious consequence of alleged FCPA non-compliance and tend to generate the most headlines.

However, as has been discussed on these pages for years  including in this article “FCPA Ripples”, settlement amounts are only one consequence of the overall financial ramifications of FCPA scrutiny and enforcement.

As highlighted in this prior post, in early 2019 Cognizant Technology Solutions, without admitting or denying the SEC’s findings, resolved a $25 million SEC enforcement action in connection with various licenses and permits in India. To get to that point, the company spent approximately $75 million in pre-enforcement action professional fees and expenses. (See here).

Like many instances of FCPA scrutiny and enforcement, Cognizant was also hit with a variety of civil lawsuits by shareholders. (See here).

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The Many Issues To Consider From The Cognizant Technology Enforcement Action

Issues

Previous posts here and here highlighted the recent Foreign Corrupt Practices Act enforcement action against Cognizant Technology Solutions and two of its former executives.

This post continues the analysis by highlighting several issues to consider.

Timeline

As highlighted in this prior post, Cognizant disclosed its FCPA scrutiny in a September 2016 SEC filing. Thus from start to finish, Cognizant’s FCPA scrutiny lasted approximately 2.5 years. While 2.5 years is shorter than recent medians of over 4 years (see here), 2.5 years is still too long for FCPA scrutiny to last.

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