London-based Diageo plc will pay the SEC more than $16 million to resolve FCPA offenses that stretched over six years and involved bribes to foreign officials in India, Thailand, and South Korea.
The maker of many top liquor brands — including Johnnie Walker and Windsor Scotch whiskeys — paid $2.7 million in bribes through subsidiaries for sales and tax benefits.
Diageo’s civil penalty consists of $11,306,081 in disgorgement, prejudgment interest of $2,067,739, and a further penalty of $3 million.
The company apparently won’t be prosecuted by the DOJ for the offenses.
Diageo paid $1.7 million in bribes to government officials in India from 2003 to mid-2009. “The officials were responsible for purchasing or authorizing the sale of its beverages in India,” the SEC said, “and increased sales from these payments yielded more than $11 million in profit for the company.”
In Thailand, Diageo paid $12,000 per month from 2004 to 2008– totaling nearly $600,000 – to a Thai government and political-party official for “consulting” services. He intervened on Diageo’s behalf in multi-million dollar tax and customs disputes, helping it win favorable decisions from the Thai government.
In South Korea, it paid $86,000 to a customs official “as a reward for his role in the government’s decision to grant Diageo significant tax rebates.” Other payments went to customs officials for travel and entertainment expenses connected with the tax negotiations. Diageo also gave hundreds of cash payments as gifts to South Korean military officials to obtain and retain liquor business.
“For years, Diageo’s subsidiaries made hundreds of illicit payments to foreign government officials,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement. “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.”
It’s unusual for the SEC to resolve FCPA violations with administrative action only. Usually it files a civil enforcement suit in federal court.
The SEC said Diageo cooperated with the investigation and took remedial measures, “including the termination of employees involved in the misconduct and significant enhancements to its FCPA compliance program.”
Diageo plc trades on the NYSE under the symbol DEO.
View the SEC’s July 27, 2011 news release here.
Download the SEC’s Release No. 64978, Accounting and Auditing Enforcement Release No. 3307, and Administrative Proceeding File No. 3-14490 (all dated July 27, 2011) here.