Log in or Register for enhanced features | Forgotten Password?
White Papers | Suppliers | Events | Report Store | Companies | Dining Club | Videos
Markets & Regulations
Regulatory & Safety
Return to: DBR Home | Markets & Regulations | Regulatory & Safety

Diageo to pay $16m to settle Asian corruption lawsuit filed by US SEC

DBR Staff Writer Published 28 July 2011

British spirits major Diageo has consented to pay over $16m to settle the bribery lawsuit filed by US Securities and Exchange Commission (SEC) on charges of potential violations of the US Foreign Corrupt Practices Act (FCPA).

The US SEC alleged that, during 2003-2009, the spirits company's divisions in India, South Korea and Thailand made payments of more than $2.7m in bribes to government officials and public liquor units of those countries to gain sales and tax benefits in regard to its Johnnie Walker and Windsor scotch whiskeys.

The spirits company paid more than $1.7m in bribes to lots of Indian government officials, responsible for purchasing or authorizing the sale of its beverages in the country, from 2003 to mid-2009, and earned more than $11m in profit.

According to the SEC findings, Diageo paid around $600,000, for the period of 2004 to mid-2008, to secure and maintain a Thai government and political party official's favor in regard to the pending multi-million dollar tax and customs disputes.

In Korea, the company paid KRW100m (more than $86,000) to a South Korean customs official for playing a key role in the government's decision to grant it major tax rebates.

Diageo also made lots of payments as gifts to South Korean military officials in order to secure and retain liquor business.

The SEC's order found that Diageo and its subsidiaries failed properly to account for these illicit payments in their books and records.

The British spirits giant has reportedly shown these payments in its books under expenses on vendors and private customers, or not included them at all.

The SEC has filed a lawsuit against Diageo for masking these payments and showing them as legitimate expenses in its records.

Diageo, neither admitting or negating these chargres, has agreed to pay $13,373,820 to the SEC in disgorgement of profits and pre-judgment interest, and a $3m penalty to the SEC.

The company has also agreed to stop and refrain from committing any more violations of the books and records and internal controls provisions of the FCPA.

SEC division of enforcement associate director Scott Friestad said for years, Diageo's subsidiaries made hundreds of illicit payments to foreign government officials.

"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," Friestad added.