Cognizant Technology Solutions (CTSH) customers and shareholders breathed a collective sigh of relief this morning. The reason: An internal corruption investigation, announced in September, has revealed no major impact to the business and no need to restate historical financial results so far, according to CEO Francisco D'Souza.
Still, company officials concede the investigation is ongoing and D'Souza didn't speculate about how long it will take to wrap up.
Former Cognizant President Gordon Coburn resigned in September amid the probe. At the time, the company said it was exploring whether certain payments relating to facilities in India were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act.
During an earnings call this morning, D'Souza hinted that additional senior members of the company may have been dismissed in connection with the probe.
"First, I think it's important to note that we do not anticipate any impact on our ability to continue to provide the quality services our clients expect from us," D'Souza said. "Second, as disclosed in the Form 10-Q we filed this morning, we've identified approximately $5 million in potentially improper payments to-date. We've evaluated the effect of such payments and concluded that they are not material and do not require a restatement of our historical financial statements."
Cognizant Dismisses, Demotes Managers?
Amid the investigation, Cognizant discovered "that certain members of senior management may have been aware of or participated in the matters under investigation." Those who may have been involved are no longer with the company or in the senior management position, he added.
Cognizant voluntarily disclosed the alleged corruption to the U.S. Department of Justice and the Securities and Exchange Commission in September, he noted, and the company continues to maintain a strong commitment to corporate compliance mandates.
While the investigation hasn't uncovered massive issues, D'Souza conceded that the company can't predict any final outcomes. "The investigation is ongoing," he said. "I don't want to speculate on how long it's going to take or the costs that may be associated with it going forward, but our commitment is to conduct a thorough investigation and we're committed to doing that."
Wall Street Relieved
Cognizant's overall third quarter revenue was $3.45 billion, up 8.4% from the year-ago period and up 2.5% sequentially.
The results largely beat Wall Street's expectations. Shares rose about 5 percent today.
