The IT outsourcing services provider informed the U.S. Justice Department and the Securities and Exchange Commission that it is examining payments in India due to the fact that they may have violated a federal anti-foreign corruption act.
The regulation in question is the U.S. Foreign Corrupt Practices Act, and Cognizant is delving into payments linked to facilities in India that may have been made improperly, thus violating the act.
The investigation is only beginning, and the board’s audit committee — along with outside lawyers — is focusing on several company-owned facilities. A change of management has also been issued along with the move.
President Gordon Coburn announced his resignation from Cognizant, which will now be led by Raj Mehta, who previously served as chief executive for IT services. It is unclear why Coburn resigned from his post, and the company gave no indication as to whether the move was related to corruption allegations.
At the end of 2015, Cognizant had 162,500 employees in India, amounting to three-quarters of its total workforce. The company said that violating anti-corruption regulations could result in criminal or civil penalties.
Additionally, the company’s core business of outsourcing IT and other business processes could be hit hard as violating these laws could disqualify Cognizant from contracting with the government and certain private companies.
CTSH shares fell 11.8% today.