Alert: "DOJ Declines to Prosecute Cognizant for FCPA Violations"

The Department of Justice (“DOJ”) recently announced that it is declining to prosecute Cognizant Technology Solutions Corporation (“Cognizant”) for paying bribes to government officials in India in violation of the Foreign Corrupt Practices Act (“FCPA”). In its declination letter, the DOJ cites multiple factors in its Corporate Enforcement Policy as reasons it chose not to prosecute.

The FCPA Corporate Enforcement Policy was adopted by the DOJ in November 2017. Among other things, it provides a presumption that the DOJ will decline to prosecute a company (absent aggravating circumstances) if the company (i) voluntarily self-discloses misconduct; (ii) fully cooperates; and (iii) timely and appropriately remediates.

In Cognizant’s case, it voluntarily self-disclosed the bribes within two weeks of its Board learning about them. It fully cooperated with the government’s investigation. And it remediated the problem, including firing and disciplining those involved in the wrongful conduct. Cognizant was also forced to disgorge all of its ill-gotten profits.

The purpose of the Corporate Enforcement Policy is to encourage companies to self-disclose their FCPA violations. Declination announcements, such as with Cognizant, are meant to demonstrate that the policy is working and to encourage companies in similar situations to come forward and self-report.

However, the decision about whether and when to self-disclose a violation of the FCPA remains complicated. For example, if the DOJ determines that aggravating circumstances are present, the benefit of self-disclosure is eliminated. Further, the Securities and Exchange Commission, which also has FCPA enforcement authority, is not bound by the Corporate Enforcement Policy.

When a company discovers a potential FCPA violation, it must carefully consider both the benefits and the risks associated with self-disclosure.