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Cognizant Technology Says Ex-Lawyer’s Fees May Be ‘Fraudulent’ (1)

Feb. 19, 2020, 11:44 PMUpdated: Feb. 20, 2020, 12:35 AM

Cognizant Technology Solutions Corp. says its former top attorney’s legal bills are so unreasonable they raise questions of “fraudulent billing” and a court should not order the company to pay them without further investigation.

The company’s former chief legal officer Steven E. Schwartz argues that Cognizant is bound by an indemnity agreement to pay his legal bills, but has refused to do so.

Schwartz and the company’s former president, Gordon Coburn, were indicted by the Justice Department and investigated by the Securities Exchange Commission for allegedly facilitating a $2 million bribe to a government official in India in 2014. Schwartz resigned in 2016, but says his ongoing legal fees are covered under his agreement with Cognizant.

Schwartz sued Cognizant in December after it stopped paying the bills for Bohrer PLLC, one of the law firms he hired to represent him, in September 2019.

“Cognizant has been hostile” in its refusal to pay, Schwartz’s attorney, Samuel T. Hirzel of Heyman Enerio Gattuso & Hirzel LLP, told Delaware’s Court of Chancery at a hearing Wednesday on his motion for summary judgment.

Schwartz has been relying on Cognizant for legal fees to defend himself against allegations that he violated the Foreign Corrupt Practices Act in connection with construction of the company’s campus in Chenai, India.

Bohrer’s fees are roughly twice that of Coburn’s and are also twice that of Schwartz’s lead counsel Paul, Weiss, Rifkind, Wharton & Garrison, Cognizant’s attorney, David E. Ross of Aronstam & Mortiz LLP, told the court

Bohrer PLLC’s invoices logged 600% markups on contract attorneys, resulting in a $2.4 million profit for what should have been basic pass-through expenses, Ross said. There is “substantial objective evidence” of “gross billing issues” and even “possible fraud,” Ross alleged.

Hirzel objected to the fraud allegations. He said Schwartz was innocent of all charges and should be able to hire attorneys to defend him as needed.

A Bohrer spokesman told Bloomberg Law that the allegations of fraud are “outrageous.”

“To make such an accusation without any evidence is frankly libelous and reflects how low Cognizant is willing to stoop to not only withhold payment from the Bohrer firm, but more importantly, to smear Mr. Schwartz and the Bohrer firm’s reputation,” the Bohrer spokesman said. “All of this is a deliberate and calculated effort to deny Mr. Schwartz the counsel he both chose and is entitled to under his indemnification and advancement agreement with Cognizant, because he believes the Bohrer firm is essential to mounting the legal defense necessary to clear his name.”

Delaware Chancery Court Chancellor Andre Bouchard said he would take the matter under advisement and asked the parties to submit additional briefs within seven to 10 days.

Cognizant in February of last year agreed to pay $25 million to settle charges in connection with the investigations.

The case is Schwartz v. Cognizant Technology Solutions Corp., Del. Ch., No. 2019-1004, hearing 2/19/20.

(Updates with Bohrer firm comment in tenth paragraph.)

To contact the reporter on this story: Leslie A. Pappas in Wilmington, Del. at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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