Liquor-maker settles with US in bribery case
By The Nation, Bloomberg
2011-07-30
Diageo said in a statement released yesterday that it had agreed to a settlement of the US Securities and Exchange Commission (SEC) investigation into potential violations of the US Foreign Corrupt Practices Act (FCPA).
The investigation related to payments involving Diageo's subsidiaries in Thailand, India and South Korea.
In Thailand, bribes of about US$12,000 (Bt358,000) a month were paid for four years to a government official who lobbied for the company in tax and customer disputes, according to the SEC's administrative order.
Diageo is the maker of Johnnie Walker scotch and Smirnoff vodka.
Under the settlement, Diageo has agreed to pay $13,373,820 to the SEC in disgorgement of profits and pre-judgement interest, to pay a $3 million penalty to the SEC, and to cease and desist from committing any further violations of the books and records and internal controls provisions of the FCPA.
Diageo said it took the SEC's findings seriously and regretted the matter.
Systems and controls have been enhanced in an effort to prevent the future occurrence of such issues and to reinforce, everywhere the company operates, a culture of compliance and commitment to the principles embodied in Diageo's code of business conduct.
The US regulator had claimed that the firm bribed officials in South Korea, India and Thailand to win sales and tax benefits.
Units of London-based Diageo paid more than $2.7 million in bribes from 2003 to 2009, recording them as legitimate business expenses for vendors and private customers, or omitting them altogether, the SEC said yesterday. The firm made about $11 million in profits as a result of the payments, the regulator said in an administrative order.
"For years, Diageo's subsidiaries made hundreds of illicit payments to foreign government officials," Scott Friestad, associate director in the SEC's enforcement division, said in a statement. "As a result of Diageo's lax oversight and deficient controls, the subsidiaries routinely used third parties, inflated invoices, and other deceptive devices to disguise the true nature of the payments."
Diageo resolved the FCPA claims without admitting or denying wrongdoing.
Payments were made to hundreds of Indian officials who were responsible for purchasing or authorising the sale of its beverages, the SEC said.
Travel and entertainment expenses were paid for South Korean officials involved in tax negotiations, the SEC said. South Korean military officials routinely got gifts from Diageo employees aiming to win or keep business, the agency said.
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