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Reflections on the Cognizant FCPA Resolution: Does DOJ Mean What it Says? (Part III of IV)

It’s easier to fool people than to convince them they have been fooled. — Mark Twain

The only difference between reality and fiction is that fiction needs to be credible. — Mark Twain

We live in an era where credibility and truthfulness are character values that are often challenged, questioned and indeed overrun.  Trust and integrity are values of utmost value and importance.  In an environment where we rely on institutions, leaders, and society to adhere to our core values, it is even more important for institutions to speak with consistency and integrity. 

I do not mean to overreact – we need far less drama in our lives and I am devoted to living and working to minimize drama. 

The Justice Department’s FCPA resolution of the Cognizant case is curious and requires some careful inspection.  I am not looking to create a problem where none exists but there are definitely some issues that require further explanation or at least examination.

At first glance, Cognizant’s FCPA resolution appears to fall within the “normal” pattern of corporate resolutions and reflects the application and expectations surrounding the new FCPA Corporate Enforcement Policy.  But like many things in life, first appearances can be deceiving. 

Unfortunately, when you look a little closer at the decisions made in this case, you are left scratching your head with a quizzical look on your face (kind of like the way my dog looks at me when I don’t immediately jump up and play with him whenever he wants).

The FCPA Corporate Enforcement Policy is a strong and effective policy, well-conceived and with adequate carrots and sticks.  While people may disagree as to the policy lines that are drawn, the presumption of a declination in exchange for a voluntary self-disclosure, full cooperation and remediation makes sense, especially when companies are still required to disgorge any illegally-earned profits as part of a declination.

The policy conditions such a resolution on the absence of “aggravating circumstances,” which includes the “seriousness of the offense,” including “involvement by executive management of the company in the misconduct.”

To state the obvious, the executive management of the company’s participation in the misconduct was deemed serious enough to justify a criminal indictment of the two individuals, the president and the general counsel.  By definition, a criminal indictment against senior executives should disqualify the company from earning a declination.

Cognizant could still earn a significant reduction in any penalty but should not have been entitled to a declination, unless there are some compelling circumstances not publicly-disclosed that justifies the Justice Department’s decision.

In the Cognizant case, the scheme was authorized, carried out and supervised by the president, general counsel, chief operating officer and vice president of administration.  No one can dispute that these four officers fall into the category of “senior management” or that their conduct constituted “involvement by executive management.”  Nonetheless, the Justice Department’s declination letter brushes aside this fact and states with a conclusory preface “despite the fact that certain members of senior management participated in and directed” the criminal conduct.”

If the Cognizant case does not constitute an “aggravating circumstance” because of senior management involvement, then I would be interested to know what set of facts would fall within the aggravating circumstance?

The Justice Department’s interpretation in the Cognizant case stretches the aggravating circumstance to situations that are hard to imagine – would the entire C-Suite have to participate in a bribery scheme to meet the aggravating circumstance criterion?  Further, the amount of bribery involved in this case – a $2 million payment (and possibly $1.7 million more) is a fair amount of money.  The seriousness of the violation resulting in the criminal indictment of the president and general counsel speaks for itself and on its face should constitute an aggravating circumstance that disqualifies the company from a declination. 

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