Despite President Donald Trump’s pause on foreign bribery enforcement, prosecutors are proceeding to trial in a longstanding corruption case against two former technology executives from a New Jersey professional services company.
As of Monday, jury selection began in a federal courthouse in Newark, NJ, in the trial of Gordon Coburn and Steven Schwartz, former executives at Cognizant Technology Solutions. Coburn, Cognizant’s former president, and Schwartz, its former chief legal officer, were charged in 2019 over their alleged involvement in paying bribes in India, where the company has a large presence. Both men have pleaded not guilty.
The SEC and the Department of Justice (DOJ) are both pursuing their Foreign Corrupt Practices Act (FCPA) charges in court in this case.
The SEC is seeking permanent injunctions, civil money penalties, and officer and director bars against Coburn and Schwartz. Without admitting or denying the allegations, the company agreed to pay disgorgement and prejudgment interest of approximately $19m and a civil penalty of $6m.
FCPA case
The SEC’s complaint alleges that in 2014, a senior government official of the Indian state of Tamil Nadu demanded a $2m bribe from the construction firm responsible for building Cognizant’s 2.7 million square foot campus in Chennai, India.
As alleged in the complaint, Gordon Coburn, Cognizant’s President, and Steven Schwartz, the company’s Chief Legal Officer, authorized the contractor to pay the bribe, and directed their subordinates to conceal the bribe by doctoring the contractor’s change orders.
The SEC also alleges that Cognizant authorized the construction firm to make two additional bribes totaling more than $1.6m, and that Cognizant allegedly used sham change order requests to conceal the payments it made to reimburse the firm.
The case against Coburn and Schwartz has already faced numerous delays and setbacks. In 2021, the Cognizant defense team accused prosecutors of improperly outsourcing their investigation into the men to the company itself, although a judge did not buy that argument.
Charges
The SEC charged Coburn and Schwartz with violating the central recordkeeping and internal controls provisions of the Securities Exchange Act of 1934, specifically SEC Rules 13b2-1 and 13b2-2. The Commission is seeking permanent injunctions, civil money penalties, and officer and director bars against Coburn and Schwartz.
The SEC’s order as to Cognizant found that the company violated Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, which are the anti-bribery, books and records, and internal accounting controls provisions of the federal securities laws.
FCPA in limbo
Prosecutors said last month they had reviewed the case in light of the order and would be moving forward. It means the government is continuing to prosecute defendants for conduct that it says it is not even investigating right now.
Let’s look back at where the Trump administration stands vis à vis the 1977 foreign bribery law and its enforcement.
An executive order in early February, entitled Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security, put a halt to initiating any investigations or enforcement actions under the FCPA and ordered a review of the law’s guidelines and policies by Attorney General Pam Bondi. This was just days after AG Bondi had issued multiple memoranda, one of which saying the FCPA would be enforced, but with a narrower focus, targeting cases involving drug cartels and other organized crime.
Presidential administrations with their various regulatory agency heads have more or less thrown their weight behind the FCPA and its enforcement for decades, believing that grease payments to foreign officials was no way to win business and only invited more criminal activity. This mindset was only enhanced by the fact that some other countries adopted and actively used their own foreign bribery laws against all (including American) businesses, such as in Brazil, France, Switzerland and the UK.
The fines have been high too, with Goldman Sachs being assessed a whopping $1.66 billion of total penalties in 2020 and other countries (the home countries of the businesses being charged) joining the United States in investigating and even jointly charging companies and individuals in these matters.
But the question remains whether AG Bondi reviewed this case substantively as required by President Trump’s recent executive order on the FCPA “to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives” and decided it made the cut. Or if the review was not possible in this timeframe and other (non-cartel-related?) cases will be handled differently.
Either way, it’s no time to presume either outcome just yet, nor is it time to de-prioritize any anti-bribery/anti-corruption policies, procedures, internal controls and training.
Author’s Update
On March 4, John Giordano, the US attorney for New Jersey, asked the judge in the case to put the Coburn and Schwartz trial on hold for 180 days while he weighs how to apply a Trump executive order pausing enforcement of the FCPA.
The judge didn’t indicate whether he would grant the request and asked prosecutors for information on how a delay might affect the defendants’ rights to a speedy trial.