Cognizant Solutions, an outsourcing firm that hires most of its foreign workers in India, is the largest user of H-1B workers in the nation, beating Amazon by two to one. And it pays these workers about $50,000 less a year than Amazon does.
Cognizant has just agreed in a federal court to pay various current and former stockholders a total of $95 million to handle charges that it behaved badly (outside the labor market), apparently both in India and in the U.S.
Meanwhile your correspondent may become the passive recipient of $70 or so as a result of the court settlement (more on that calculation later.) This is a complex story and confirms my suspicions that some firms using our immigration laws to lower labor costs and exclude U.S. workers may often be cheating in other ways as well. It certainly was true in this case.
The Company. Cognizant Technology Solutions Corporation is an American organization, spun out of Dun and Bradstreet 27 years ago, with headquarters in Teaneck, NJ, a few miles west of New York City. It trades on the NASDAQ exchange. The firm was founded in 1994 by Francisco D'Souza, and Kumer Mahadeva, of Indian and Sri Lankan descent, respectively; its president is Brian Humphries, an Irishman. Its business model, much like that of India-based Infosys and Tata, is to hire workers, largely IT people, and then rent them out to other corporations, like Facebook and Walt Disney. Its dollar volume in 2020 was in excess of $16 billion, according to Wikipedia.
Its Use of H-1Bs. According to U.S. Department of Labor data, as assembled by the myvisajobs website, Cognizant filed for more H-1B workers than any other firm in FY 2021. In that time period it sought 28,725 Labor Condition Applications, while the next firm, Amazon, sought 14,417 of them. About one of three of initial LCAs actually produces a foreign worker, and the LCAs cover such situations as new hires, renewals and transfers. Cognizant said its average salary for these H-1Bs was $88,578 (much like the other body shops); Amazon, much like the other “solution companies”, paid an average of $136, 887.
In another locus of decision making in the H-1B hiring process, the Department of Homeland Security weighs in with a different set of approvals and denials. It found in 2019 that only 62 percent of Cognizant’s applications were approvable, while 98 percent of Amazon’s were.
And while Cognizant may have its headquarter in the Jersey suburbs, in its hiring decisions it acts like the other labor broker firms headquartered in South India. Like all H-1B employers the firm can choose its workers from anywhere in the world, but in a listing of out-sourcing firms and the nations where they recruit, Cognizant was at the top of the list hiring 99.6 percent of its workers from India, presumably largely male, largely Hindu, and from the southern part of the nation.
So Cognizant was, and is, using large numbers of foreign workers (nearly 100% from India), is paying them less than the American firms, and is having a harder time getting their applications approved. Not a very flattering picture of the company.
The Charges. Meanwhile, and with no relation to its labor practices, Cognizant has been behaving in such a way that some lawyers, and that wonderful old leftie institution, the Amalgamated Bank (named after the late garment workers union), have charged it with inappropriate behavior that has led the stock price to fall.
Here are some of the things that have been said about Cognizant, quoting from the proposed settlement agreement (and thus prose that the outsourcing company’s lawyers have agreed to):
12. On September 30, 2016 Cognizant announced that it was conducting an internal investigation into ‘whether certain payments relating to facilities in Indian were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act....’ Cognizant also announced that Gordon Coburn, the Company’s President, had resigned.
15. . . . Among other things, the Amended Complaint alleged that the Original Defendants made . . . false . . . statements about Cognizant’s business and financial results including... payments relating to Company-owned facilities in India. . . the price of Cognizant common stock was artificially inflated as a result of the allegedly false and misleading statements and declined when they were disclosed.
18 On February 14, 2019. . .the U.S. Department of Justice indicted Coburn and Schwartz [Steven Schwartz, General Counsel at the time of the alleged bribery] on charges of [scheming] to bribe one or more government officials in India to secure. . .a planning permit relating to Cognizant’s . . . facility in India.
This was not a handful of cash. According to the PACER file of court documents (see case 2:19-cr-00120-KM) $2 million was paid to the officials by the construction company, with Cognizant repaying the contractors and hiding that payment as one for a project change order.
But the flow of H-1B workers continued, despite the fact that the company’s president resigned and the chief counsel “departed” and both were indicted by the feds; that stockholders (albeit for a period of two months) lost 8 percent of their investment; and that Indian laws were broken,
The Proposed Settlement. The proposal, now before the federal courts in New Jersey, calls for a total payment of $95 million to the stockholders at the time, with a significant portion of the total going to the lawyers for the plaintiffs. The settlement suggests that the average payment will be 35 cents a share, with the exact amount to be determined by a variety of factors.
I received a long document in the mail cited above, indicating that I might be in the shareholder class. I had confessed to my readers in an August 6, 2015 posting that I had purchased 100 shares of the stock on May 10, 2013 to see if I could learn anything about the firm’s H-1B operations in my role as a stockholder. I did not, and got rid of the stock sometime later.
As of my 2015 posting the stock had split, so that I had 200 shares, and they were worth twice what I had paid for them.
I said at the time that I was uncomfortable with the purchase, that “I felt that I had put my money, deliberately, into a munitions/tobacco corporation that traded extensively with North Korea.”
But if I had not bought the stock I would never have learned about Cognizant’s $95 million effort to shut up its critics. The mail carrier brought me the announcement of the proposed settlement.