Ex-Cognizant Execs Challenge DOJ Corporate Cooperation Strategy

Two former Cognizant executives facing bribery charges are raising constitutional arguments in a New Jersey courthouse this week that could hinder how the Justice Department deals with cooperating companies in criminal investigations.

If they succeed in suppressing evidence by arguing that company attorneys were de facto prosecutors, the government may need to delineate boundaries more carefully when interacting with cooperating companies, white-collar lawyers say.

Defense attorneys across the US have been closely monitoring the case, heading into an evidentiary hearing scheduled to begin Tuesday in US District Court in Newark, N.J. The outcome could offer new avenues for individual defendants to push back against DOJ’s increasing reliance on voluntarily reporting businesses to indict executives, while also posing risks for companies about details of their internal investigation going public.

“It’s potentially a game changer,” said Josh Robbins, a former federal prosecutor in Los Angeles who co-chairs the white collar and investigations practice at Buchalter.

The technology company’s former president, Gordon Coburn, and its former chief legal officer, Steven Schwartz, are charged with violating the Foreign Corrupt Practices Act after allegedly arranging for a $2 million bribe to government officials in India to facilitate construction of an office park.

After conducting an internal investigation and cooperating extensively with the government, Cognizant obtained a declination letter in February 2019. The following day, Coburn and Schwartz were indicted.

Since then, they have accused the government of outsourcing its investigation to the company.

According to Coburn and Schwartz, the statements they made in interviews with company counsel were coerced and ought to be excluded, along with any derivative evidence or “fruit of the poisonous tree.”

They also argue that the government must search Cognizant’s files for exculpatory material that must be produced under Brady.

Under Brady, prosecutors are required to search for and disclose exculpatory material when it is in their actual or constructive possession. Here, defendants argue that it is the latter.

If the court agrees, it’s conceivably a real problem for the prosecution, according to James Koukios, a former DOJ prosecutor and co-head of Morrison Foerster’s FCPA and global anti-corruption practice.

The harm to the government’s evidence would depend on what might be deemed tainted by the allegedly coercive interviews.

But having to do a Brady search of the corporation’s files would be practically impossible, Koukios said.

Broader Implications

Even if the former executives are convicted after a trial scheduled in October, the judge’s initial ruling following this week’s hearing could have immediate implications.

“If the court in this case agrees with the defendants that just the standing policy itself creates enough pressure to convert the company into a state actor, that is going to apply really broadly across the board to corporate investigations,” Robbins said.

The hearing comes after the department’s criminal division in January sweetened the leniency incentives for self-reporting companies. That included a clearer pathway for businesses to avoid prosecution and receive steep penalty discounts when they disclose “immediately” and provide “extraordinary cooperation.”

The initiative is the latest in a decadelong effort by DOJ to entice companies to disclose and cooperate.

Whether the defendants win is likely to turn on the degree of coordination between the government and Cognizant, rather than on some broader theory of policy pressure, several attorneys said.

Because it’s likely to be highly fact-specific, “it isn’t as though a pro-defense ruling would automatically compel the conclusion that defendants in different circumstances will prevail,” Andy Wise, a partner at Miller & Chevalier said.

Still, the idea that courts are entertaining the notion that independent investigations aren’t really independent “is pretty remarkable,” he said.

Deutsche Bank Precedent

The defendants base their suppression challenges on Garrity v. New Jersey, a 1967 Supreme Court case holding that public officials can’t use the threat of terminating someone’s employment to force them to abandon their constitutional rights against self-incrimination. Although the case involved the conduct of a government employer, the rule applies where the actions of a private employer are “fairly attributable to the government.”

In 2019, Judge Colleen McMahon, of the Southern District of New York, entertained the Garrity theory when it was raised by a former employee of Deutsche Bank AG in a case involving the alleged manipulation of the London Inter-Bank Offered Rate.

Without reaching the ultimate question, McMahon said the defendant had “made a rather convincing showing” that Deutsche Bank and its outside counsel “were de facto the Government for Garrity purposes.”

Specific facts leading to Judge McMahon’s decision allowed the government to argue it was a one-off when defense attorneys cited it in other cases, said Benjamin Singer, who used to head DOJ’s securities and financial fraud unit. But Cognizant’s case is different and may have greater relevance for defense lawyers, he said.

“If the Coburn judge decides that it’s still attributable to the government, I think counsel for individual defendants would say any time you have a company that’s seeking a benefit from the government in one of these investigations—which is almost every case—company interviews should be attributed to the government,” said Singer, now a partner at O’Melveny & Myers.

‘Tough Hurdle’

Before resigning, Schwartz and Coburn participated in initial interviews conducted by corporate counsel. They claim the interviews were coerced, because refusing to cooperate would have cost them their jobs.

The court’s determination will depend on the specific facts, but showing that the corporate investigators are an arm of the government is going to be a tough hurdle to overcome, said Maria Calvet, former prosecutor and co-chair of the global anticorruption and international risk practice at Ropes & Gray LLP.

“Even the most robust voluntary corporate investigation, in my experience in FCPA enforcement, has been treated as separate and apart from the government’s obligations necessary to obtain a conviction,” Calvet said.

In FCPA enforcement, there’s a widely held and common understanding about what corporate defense counsel do versus what government investigators do. This case could lead to more scrutiny of where those lines are drawn, Calvet said.

The defendants’ broader theory that policies encouraging cooperation may alone convert a private entity into an arm of the government may be a bit of a stretch, according to Koukios.

Counsel for corporations have independent governance obligations and good reasons for requiring employees to cooperate in internal investigations.

If Cognizant’s actions are attributed to the government, it is more likely to be based on the way that information was communicated and the degree of government direction than on some blanket cooperation policy, Koukios said.

Singer said a finding for the defense could lead prosecutors to reconsider their practice of collecting detailed interview “downloads” from company investigations.

Even a ruling for the government won’t stop defense attorneys from making similar outsourcing arguments in other cases and other jurisdictions, Robbins said.

“This could be the first step in a significant development,” he said, “that’s going to help determine how effective or how complicated this DOJ approach of playing companies against their employees will be.”