Securities class action suit filed against IT giant Cognizant

The IT and consulting firm Cognizant Technology Solutions is facing a securities class action lawsuit alleging that it made false and misleading statements about its operations. To learn more about this case, visit Battea’s Cognizant case summary.

Specifically, the complaint alleges that Cognizant made a number of false or misleading statements, or failed to disclose certain aspects of its operations. These issues include a lack of internal controls over financial reporting and that the company made improper payments for building licenses and permits for its operations in India. The suit has a class period of Feb. 25, 2016, to Sept. 30, 2016.

A major IT company is facing a securities class action suit.A major IT company is facing a securities class action suit.

A look at the situation
On Sept. 30, Cognizant itself announced that it was launching an internal investigation into whether certain of its executives made bribes to Indian officials to obtain permits and building licenses “in possible violation of the U.S. Foreign Corrupt Practices Act and other applicable laws.” It further revealed that it was cooperating with the U.S. Securities and Exchange Commission and Department of Justice in trying to get to the bottom of the matter. It further added that there was no way to predict what kind of action would be taken against it by those law enforcement agencies.

In addition, president Gordon Coburn stepped down just before the investigation was revealed, according to a report from the Indian Express, an English-language newspaper based in Mumbai. That move alone led to a significant downturn in the company’s stock price. A spokesman for Cognizant said Coburn resigned of his own accord, and that the company owns about 12 of its 45 facilities in India. Raj Mehta, a long-time executive at the company, was elevated to Coburn’s role of president. Cognizant is currently the third-largest IT employer in India.

“We uncovered this situation through our own compliance processes, voluntarily notified the relevant US agencies, and are fully cooperating with them,” the spokesman told the Indian Express. “We are conducting a full investigation, under the oversight of the Audit Committee of the Board of Directors, with the help of outside counsel.”

The affect on stock prices
Indeed, the downturn in shares of Cognizant was immediate in the wake of these revelations. The stock closed at about $55 per share on Sept. 29, the day before the company announced the move, but plunged to $47.71 the next day, a decline of about 13 percent. Since then, the company has recovered some of that ground, never really reaching that kind of low again and now stands at about $52.50. In recent days, its price reached as high as $55.20. However, it should be noted that all these numbers are down from the company’s year-to-date highs, and not even really in line with annual averages.

As recently as late June, Cognizant’s stock was trading at $62.70 per share, down slightly from the year-to-date peak of $63.31 seen in late January.

For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or