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).
Recently, Cognizant disclosed an additional $95 million ripple as it stated:
“Cognizant Technology Solutions Corporation has entered into a settlement agreement that, subject to the approval of the United States District Court for the District of New Jersey, would resolve the previously disclosed consolidated putative securities class action complaint against the Company and certain former officers of the Company. In the consolidated putative securities class action complaint filed on behalf of a putative class of persons and entities who purchased our common stock during the period between February 27, 2015 and September 29, 2016, the lead plaintiffs alleged violations of the Exchange Act, based on allegedly false or misleading statements related to potential violations of the Foreign Corrupt Practices Act, our business, prospects and operations, and the effectiveness of our internal controls over financial reporting and our disclosure controls and procedures. The settlement agreement, which was filed by the parties with the court on September 7, 2021, provides for a payment of $95 million to the putative class (inclusive of attorneys’ fees and litigation expenses). A substantial majority of the settlement payment will be covered by the Company’s insurers under the applicable directors and officers insurance policies, after which there will be no amounts remaining available to the Company under the policies applicable to this matter and the Company’s ongoing indemnification and advancement obligations with respect to certain former officers of the Company. The Company and the other defendants are entering into the settlement agreement to eliminate the uncertainty, burden, and expense of further protracted litigation. The Company and the other defendants expressly deny that the plaintiffs in the securities class action have asserted any valid claims as to any of them.”
In a court filing, lead plaintiffs’ counsel said that it intends to seek up to 20% of the settlement amount ($19 million) to cover attorneys fees and expenses.