Bengaluru: Cognizant Technology Solutions is set to receive $5.5 million under a proposed settlement of a long-running shareholder derivative lawsuit linked to the company’s Foreign Corrupt Practices Act (FCPA) investigation and subsequent securities litigation.According to a notice filed in the US District Court for the District of New Jersey, Cognizant’s directors’ and officers’ insurers will pay $5.5 million to the company, subject to court approval. A settlement hearing has been scheduled for September 14.The derivative suit, filed in 2021 by shareholder Viswanatha Palempalli on behalf of Cognizant, alleged that current and former directors and executives breached their fiduciary duties by permitting FCPA violations, making false statements and authorising share repurchases at allegedly inflated prices.The case stems from the same events that triggered investigations by US authorities into alleged bribery involving Cognizant’s operations in India, as well as a related securities class action.Under the proposed settlement, the payment will go to Cognizant rather than its shareholders. The court notice states that the case is a derivative action, not a class action, and therefore shareholders are not entitled to individual monetary compensation.Plaintiffs’ counsel will seek court approval for legal fees and expenses of up to $1.8 million, or about one-third of the settlement amount. The fees, if approved, will also be paid from the insurers’ settlement payment. An email sent to Cognizant did not elicit a response till press time.The defendants, including former CEO Francisco D’Souza, former president Rajeev Mehta, former CFO Karen McLoughlin and several current and former directors, have denied all allegations of wrongdoing. The proposed settlement expressly states that it does not constitute an admission of liability by any of the defendants.The notice also refers to Cognizant’s earlier settlement of a related securities class action for $95 million, most of which was paid by the company’s directors’ and officers’ liability insurers.
