The Directorate of Vigilance and Anti-Corruption has registered a case against IT major Cognizant Technology Solutions (CTS) India Ltd., its contractor company Larsen & Toubro and officials of the Chennai Metropolitan Development Authority (CMDA) and Department of Housing & Urban Development in a ₹12 crore bribery case.
The allegation is that CTS through its contractor firm L&T constructed ‘KITS Campus’, a huge facility at the Special Economic Zone (SEZ), Sholinganallur, Chennai, between 2011 and 2016. Instead of obtaining the statutory planning permit prior to the commencement of construction, CTS applied for the same on February 7, 2013, i.e. 14 months after the works began.
The Member Secretary, CMDA, sent the file to the government after a lapse of eight months. It was sent to the office of the Minister for Housing and Urban Development on November 14, 2013. Six months later, the planning permit was approved by the Minister on June 26, 2014, and by that time 40% of the construction was completed.
File kept pending
The DVAC in its investigation report said Nandakumar, Project Manager, and Nagasubramanian, Assistant Manager, L&T, who had coordinated with CTS and CMDA officials, disclosed that the planning permit application reached the State Secretariat in November 2013 and was pending with the then Minister, Department of Housing & Urban Development for over six months.
In the meantime, on March 7, 2014, Srimanikandan, the Real Estate officer of CTS, Chennai, informed Gordon J. Coburn, president of CTS, United States, that ₹12 crore was required to meet the demand of bribe by the CMDA officials to expedite the approval of planning permit. He quoted the name of Ramesh, the construction head of L&T, in the process.
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The scrutiny of email communications between top officials of L&T and CTS revealed the engagement of a consultant to handover the bribe money to the CMDA or housing department officials to get the planning permit. Further investigation revealed that in a video conference, CTS president Gordon J. Coburn, and Chief Legal Officer, Steven E. Schwartz, authorised their company officials to ask L&T to pay the bribe, which would be later reimbursed through variation bills/invoices at the end of the construction project.
Accordingly, the Government Order sanctioning the planning permit was obtained on June 30, 2014, after the bribe was paid to the authorities concerned in the CMDA and Department of Housing & Urban Development. As agreed upon earlier, L&T submitted variation documents, which included ₹12 crore bribe and ₹3.2 crore paid to the liaison consultant to get the planning permit along with the items of works carried out at the site. To create justification and to hide the payment of bribe, CTS and L&T rearranged the items of work and newly introduced 44 items in the name of variation works. Various false and concocted bills and invoices were created to facilitate the payments.
Bribery scheme
The DVAC said in April 2016, the Cognizant Board of Directors conducted an internal audit of CTS, Chennai office, which revealed a series of material misstatements and omissions made by senior executives concealing a bribery scheme at the core of the company’s business. Investigations by the Department of Justice and the Securities and Exchange Commission of USA confirmed that Cognizant’s top executives directly participated in a criminal bribery scheme to obtain essential permits for critical SEZ facilities, and that these executives falsified Cognizant’s SEC filings and Sustainability Reports to facilitate the bribery scheme.
In 2019, the Department of Justice and SEC framed charges against CTS represented by its officials Coburn, Schwartz, Srimanikandan and Sridhar Thiruvengadam. The charge pertaining to the construction of ‘KITS Campus’ was that in 2014 CTS authorized its contractor L&T to pay a $2 million bribe to a senior government official for the issuance of a planning permit for a project in Chennai, India.
The payment, along with a scheme to conceal a $2.5 million reimbursement to L&T, was authorised by two senior executives at Cognizant’s US headquarters. The unlawful payments were paid from Cognizant India’s bank accounts and not accurately reflected in company’s consolidated books and records.
During the relevant period, CTS failed to devise and maintain a sufficient system of internal accounting controls at its corporate headquarters and in India. The company voluntarily disclosed this misconduct to the SEC and shared the facts developed during an internal investigation by the audit committee of its board. Cognizant paid a huge disgorgement, prejudgment interest and penalty to the SEC, United States.
Involvement of Minister
DVAC’s enquiries revealed the then Minister for Housing and Urban Development deliberately delayed the approval of the planning permit to facilitate the demand for bribes in March 2014. An amount of ₹12 crore bribe was paid to officials of CMDA, Housing and Urban Development department and the then Minister for Housing and Urban Development. The investigating agency registered a case against the accused company and officials under the provisions of the Prevention of Corruption Act, 1988.
