The dismissal of Foreign Corrupt Practices Act charges against former Cognizant Technology Solutions Corp. executives Gordon Coburn and Steven Schwartz is a pivotal moment in US anti-corruption enforcement.
It not only reflects the changing priorities of the Department of Justice but also serves as a reminder for companies to stay proactive in reviewing their compliance programs and preparing for future regulatory changes.
The DOJ’s move to dismiss USA v. Coburn came on the heels of President Donald Trump’s Feb. 10 executive order pausing FCPA enforcement for 180 days. The case marks the first instance in which the DOJ has decided to dismiss charges under the newly introduced policy framework, which reexamines the scope and application of FCPA enforcement.
US District Court Judge Michael Farbiarz dismissed the case with prejudice, effectively ending the legal battle over accusations that Coburn and Schwartz authorized a $2 million bribe to expedite a construction project in Chennai, India. Cognizant settled a parallel civil corruption lawsuit by the US Securities and Exchange Commission for $25 million.
Meanwhile, the US Attorney General’s office must perform a 180-day review of FCPA enforcement and investigation guidelines and practices, focusing on concerns that overly broad interpretations of the FCPA were creating an uneven playing field for US companies.
The review period will last through Aug. 10, with the goal of restoring proper bounds on FCPA enforcement and preserving presidential foreign policy prerogatives. The AG’s office potentially could take remedial actions to curtail “inappropriate” past FCPA enforcement actions retroactively. It also can extend the review period by an additional 180 days, if needed.
While the dismissal represents a specific decision in this case, it suggests broader implications for future FCPA cases.
Companies involved in similar investigations may see opportunities to challenge ongoing proceedings or seek dismissal, especially if their matters fall under the scope of the new DOJ review period. This could provide relief for companies that feel their actions have been subject to overreach under the previous enforcement framework.
Despite the shift in enforcement priorities, the executive order doesn’t alter the fact that companies must maintain strong anti-corruption compliance programs. The pause only applies to criminal enforcement of the FCPA; the SEC remains empowered to pursue civil actions, and other international jurisdictions continue to target foreign bribery aggressively.
In addition, the California Attorney General on April 2 issued an advisory that state attorneys general aren’t affected by the executive order and are free to use existing state law for anticorruption enforcement.
Companies must continue to assess and bolster their internal controls to mitigate the risk of future enforcement actions, both in the US and abroad, in part by:
- Reviewing past FCPA settlements. Companies previously subject to FCPA investigations should consider whether they may have grounds to seek a review or even dismissal of past charges, particularly if the government’s actions were influenced by overreaching enforcement practices.
- Engaging in advocacy. The 180-day pause provides a critical window for companies to engage with the DOJ to review ongoing investigations. Companies may want to initiate discussions with the DOJ to advocate for the reconsideration of their cases or investigate whether existing agreements can be revised under the new enforcement framework.
- Monitoring international developments. Although the US may be adjusting its enforcement approach, international regulators remain active in combatting foreign bribery. Companies with operations in high-risk regions should continue to comply with global anti-corruption laws and ensure they are prepared for scrutiny from other regulatory bodies.
The full impact of this policy shift remains to be seen, as the DOJ’s reassessment of its FCPA enforcement strategies may lead to long-term changes in how corruption-related cases are handled. Companies should remain vigilant as new enforcement guidelines are developed and be prepared for a potential rebalancing of priorities under future administrations.
The case is USA v. Coburn, D.N.J., No. 2:19-cr-00120-MEF.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Sean O’Connell is a shareholder at Baker Donelson and member of its government enforcement and investigations group.
John Ghose is a government investigations and enforcement attorney who is special counsel at Baker Donelson.
Kseniya “Nicole” Kuprovska is an associate at Baker Donelson focused on government procurement law and business litigation.
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