Farewell to Dick Dale: Cognizant Technology Declination Explained

Thomas Fox - Compliance Evangelist
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Dick Dale died on Sunday. Not familiar with that name? Let me introduce you to one of the most influence guitarists of all-time and the person who invented the rock and roll subgenre of surf rock. Indeed his peers honored him, in a 2015 Rolling Stone poll, as one of the top 100 guitarists in the history of rock. Daniel Kreps, writing Dale’s obituaryin Rolling Stone, said, “As the progenitor of the surf rock genre and an innovator who helped stretch the possibilities of the electric guitar, Dale inspired musicians like Jimi Hendrix, Eddie Van Halen, Ry Cooder and the Beach Boys. Dale’s “Miserlou” also notably featured in the opening credits sequence of Quentin Tarantino’s Pulp Fiction.”

Dale himself said of his music, it sounded like “the barrel of a goddamn wave”. He also said, “When I play, I go, ‘This sounds like a tiger; this sounds like a volcano; this sounds like the lip of the water coming over my head when I’m surfing.’ My bass player says, ‘When I stand behind you, I don’t just see your arms moving, I see your shoulders shuddering, your back straining.’ That’s because I put all my physical force into my playing. I take people for a ride on a non-chemical wave of sound.” A huge surfing aficionado, I know Dale is hanging five on the great wave in the sky all the while cranking out some of the meanest guitar around.

The same week as the Mobile TeleSystems PJSC (MTS) Foreign Corrupt Practices Act (FCPA) enforcement action was announced there were two significant speeches by Department of Justice (DOJ) officials. The first was by Deputy Attorney General Rod Rosenstein who delivered the Keynote address on recent FCPA developments at the TRACE Conference in Washington (Rosenstein speech). The second was by Assistant Attorney General Brian Benczkowski who delivered his Remarks at the 33rd Annual ABA National Institute on White Collar Crime Conference, recently held in New Orleans (Benczkowski speech).

While there was certainly much to mine out of both of these speeches, today I want to focus on how both speeches explain what many found to be the stunning result Cognizant Technology Solutions Corporation (CTSH) received when it obtained a declination for its FCPA violations, both from the strategic and tactical levels. After all, the bribery scheme was run by the C-Suite of the company and both the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) were individually prosecuted for their FCPA violations. If there was ever a case of ‘aggravating circumstances’ under the FCPA Corporate Enforcement Policy, CTSH would seemed to have presented it.

Strategic – Incentivize Exemplary Corporate Conduct

Rosenstein’s speech was published first so when I read the text it was clear the strategic reason why CTSH sustained its result. Rosenstein said, “In FCPA cases, we incentivize exemplary corporate conduct. If companies self-report violations, cooperate with investigations, and remediate harm, we reward them with a presumption that we will decline to pursue the company with criminal charges. Instead, we focus our limited resources on individuals, and on companies that fail to take compliance obligations seriously.” It is clear from this statement that the DOJ is prioritizing and incentivizing companies to step forward and not only self-disclose but also turn over information on recalcitrant employees and senior employees. But it also requires robust compliance.

Tactical – The Specific Steps to Take

The Benczkowski speech made the basis for the CTSH declination even more clear as he laid out the specific steps the DOJ found persuasive. He stated, “Certain high-level employees and agents of Cognizant allegedly participated in a scheme through which they authorized a third-party construction company to pay approximately $2 million in bribes to Indian officials for help in securing a planning permit relating to an office park project. Notwithstanding the fact that the misconduct reached the highest levels of the company, we declined prosecution.”    

Benczkowski then went on to articulate the precise reason why a declination was granted in the face of what appears to be the function definition of ‘aggravating circumstances.’ He stated, “The company voluntarily self-disclosed the conduct within two weeks of when the company’s board learned of it. As a result, the Department was able to identify the culpable individuals – and indeed, we have announced charges against the former president and the former chief legal officer of the company for their alleged involvement in the scheme.”

Benczkowski added other factors from the FCPA Corporate Enforcement Policy which CTSH met, all of which led to the company receiving this stunning result. The company’s conduct included, “the proactive and ongoing nature of its cooperation with the government in investigations and prosecutions; the effectiveness of its preexisting compliance program; and the company’s willingness to fully remediate and disgorge its entire cost savings from the bribery.”

Benczkowski also referenced a little noticed declination from August 2018 to bookend his remarks around the CTSH declination. It involved the Barbados entity, Insurance Corporation of Barbados Limited (ICBL), who also received a full declination “despite the involvement of high-level executives in a scheme to bribe a Barbadian government official in exchange for insurance contracts.” The DOJ reached that decision based, “in part, on the company’s voluntary disclosure, its significant remediation efforts, including the termination of all employees involved, its cooperation with our investigation, and its implementation of an enhanced compliance program and more robust internal accounting controls. And the Department pursued individual accountability, charging two of the company’s senior executives, as well as a former Barbadian official.”

Taken together, these two speeches made clear the reasons why the DOJ handed a declination to CTSH. The company engaged in the type of conduct, after it discovered its FCPA violation, that the DOJ wanted to reward and encourage going forward. Rosenstein made this crystal clear in his remarks, when he stated, “We aim to incentivize companies to report crimes, disgorge illegal proceeds, take remedial actions, and identify accountable officials so we can prosecute them – and do it all promptly. That will result in less corporate crime in the future.” This is not going soft on corporate crime; this is bringing corporate America into a role in the global fight against bribery and corruption.

Yet the Benczkowski speech had equal import for the compliance professional. The DOJ rewarded CTSH for not only its quick decision to self-disclose and then doing so; they also rewarded the company for having a robust pre-existing compliance program even though C-Suite executives led the bribery effort. This recognition by the DOJ makes even more important the corporate compliance function and a corporate compliance program to protect an organization if nefarious actors arise.

Dick Dale Set List (all from YouTube)

Misirlou

Surf Beat

Pipeline

Ghost Riders in the Sky

Nitrus

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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