FORMER 'EMPLOYEE' OF COGNIZANT FILES LAWSUIT AGAINST BOARD MEMBERS - REPORT!

In a shocking case, a former employee of IT major services provider- Cognizant has filed a lawsuit against current and former board members and key executives of the company.

The employees filed a lawsuit for allegedly misleading shareholders about a bribery scandal in India. 

As per an Economic Times report, the lawsuit was filed by Ravindra Guyyala in the US District Court of Delaware which follows a separate ongoing securities class action lawsuit filed by Cognizant shareholders. He alleged that the company failed to disclose the bribery and misled shareholders.

In the lawsuit, the petition names former CEO Francisco D'Souza, current CFO Karen McLoughlin, former president Gordon Coburn, and former chief legal officer Steven E. Schwartz and board members, including current CEO Brian Humphries, as defendants, ET further reported. 

Highlighting a bit about Guyyala, he is a small stock owner of Cognizant and currently based in Little Rock, Arkansas. He in his lawsuit has alleged that the executives and board members breached duties by issuing false, misleading statements and omitting material information in the company’s public filings. They did these to get approval for the construction of new campus in Chennai regarding the bribe payments.  

ET states that, Cognizant has not responded to their queries till Friday, when asked about the matter.

Looking back into history according to ET, in 2014, Cognizant had allegedly authorised a contractor to pay a $2 million bribe to a senior government official to issue a planning permit for its new campus in Chennai. 

According to the US Securities and Exchanges Commission (SEC), that time, the payment, along with a scheme to conceal a $2.5 million reimbursement to the contractor, was authorised by two senior executives at Cognizant's US headquarters, which investigated the matter between 2014 and 2016. Following which, the executives, including former Cognizant president Gordon Coburn, resigned in 2016.

Coming back to 2019, Cognizant settled the charges with the SEC without admitting or denying the allegations. The major IT firm agreed to pay disgorgement and prejudgment interest of approximately $19 million and a penalty of $6 million. 

Currently, Guyyala’s lawsuit argues that “due to their positions as employees and/or directors of Cognizant, the Individual Defendants were privy to information regarding the Company’s financial prospects and internal controls and would have been well aware of the ongoing issues at the Company," ET also adds.

Looking into the lawsuit, it seeks a jury trial, asking for improved corporate governance, payment of damages to the company and allowing shareholders to nominate board members.  

“The Individual Defendants (officials and board members) are liable for damages under Section 10b of the Exchange Act…and, if Cognizant were to be held liable in the Securities Class Action, the Individual Defendants would be liable to it for contribution,” the petition states in it lawsuit.