Shares of Cognizant Technology Solutions Corporation (CTSH 2.52%) fell 16.9% in September, according to data from S&P Global Market Intelligence, after the IT consulting company revealed an internal investigation into a possible violation of the U.S. Foreign Corrupt Practices Act.
More specifically, the bulk of Cognizant's losses last month came on Sept. 30, when an SEC filing revealed that the company is conducting an internal investigation under the oversight of an audit committee into "whether certain payments relating to facilities in India were made improperly," and potentially in violation both the aforementioned act and other applicable laws.
To its credit, Cognizant noted that it voluntarily notified (and is cooperating with) both the U.S. Department of Justice and the U.S. Securities and Exchange Commission. In addition, Cognizant simultaneously announced the resignation of company president Gordon Coburn. Replacing Coburn as president is Rajeev Mehta, who most recently serviced as CEO of Cognizant's IT-services business.
Cognizant also stated that the investigation was still in its early stages, so it remains to be seen whether it will result in any action taken or have any negative repercussions on the company's operations.
While we may need to hurry up and wait for more information on the investigation, I'm encouraged that Cognizant has been forthright about the situation so far. So in the end, I think investors would do well to focus first on those operations -- which in Cognizant's most recent quarter thankfully reflected a healthy business pipeline, modest top- and bottom-line growth, and an expanded share-repurchase program despite near-term headwinds in the IT-services space.