U.S. company to pay more than $19 Million to resolve bribery case related to India

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Beam Suntory Inc., a Chicago-based company that produces and sells distilled beverages, and describes itself as “a world leader in premium spirits” on its website, has agreed to pay a criminal monetary penalty of $19,572,885 to resolve the Department of Justice’s investigation into violations of the Foreign Corrupt Practices Act.

According to a Oct. 27, 2020 press release from the Office of the U.S. Attorney for the Northern District of Illinois, the resolution arises in part out of Beam’s scheme to pay a bribe to an Indian government official in exchange for approval of a license to bottle a line of products that Beam sought to market and sell in India.

It also has to do with related internal controls and books and records violations, which included efforts by a then-member of Beam’s Legal Department to affirmatively avoid uncovering information related to improper activities and practices by third parties engaged by Beam in India that presented corruption risks, said the press release.

Beam entered into a three-year deferred prosecution agreement with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Northern District of Illinois in connection with a criminal information unsealed Oct. 27, 2020,  in Chicago charging Beam with one count of conspiracy to violate the anti-bribery, internal controls, and books and records provisions of the FCPA.

The FBI’s Chicago Field Office investigated the case.

The press release said that according to its admissions, Beam conspired with others to violate the FCPA by, among other things, engaging in a scheme to pay a bribe of one million Indian Rupees (equal to approximately $18,000 at the exchange rate at the time) to a senior Indian government official in exchange for that official’s approval of a license to bottle “Ready-to-Drink” products that Beam sought to market and sell in India through its subsidiary, Beam Global Spirits & Wine (India) Private Ltd.

The senior Indian official’s name is not given in the press release.

The bribe was authorized by a high-ranking executive at Beam’s Asia Pacific/South America regional business unit, who directed that the payment be made through Beam India’s third-party bottler in order to conceal it.

Further, according to its admissions as spelt out in the press release, from the time Beam acquired the Indian business in 2006 through the end of the third quarter of 2012, Beam India paid bribes and made other improper payments to various Indian government officials, including corrupt payments to obtain or retain business in the Indian market.

Most of the corrupt payments were made through third-party sales promoters and distributors, who paid government officials to secure orders of Beam products at government-controlled depots and retail stores, obtain prominent placement of Beam products in government retail stores, acquire and renew label registrations and licenses, and enable the distribution of Beam spirit products from Beam India’s Behror bottling facility to warehouses in other states throughout India.

As part of the conspiracy, Beam also agreed with others to fail to implement and maintain an adequate system of internal accounting controls, which would have helped to detect and halt Beam India’s longstanding practice of making corrupt payments to Indian government officials, and to falsify its books and records, the press release said.

As part of the deferred prosecution agreement, Beam agreed to continue to cooperate with the department in any ongoing or future criminal investigations concerning Beam, its executives, employees, or agents.  In addition, under the agreement, Beam agreed to enhance its compliance program and to report to the government on the implementation of its enhanced compliance program.

In July 2018, in a related matter with the U.S. Securities and Exchange Commission, Beam agreed to pay the SEC disgorgement and prejudgment interest totaling approximately $6 million and a civil monetary penalty of $2 million.

Beam Suntory Inc. released a statement announcing “that the company has entered into an agreement with the U.S. Department of Justice (DOJ) that resolved the government’s investigation into conduct by the company and its India subsidiary.”

“The company’s corrective actions included terminating employees who violated the company’s code of business conduct and ethics, suspending all commercial activity in India until satisfied the business could be conducted compliantly, implementing stringent controls, and strengthening its global compliance function to identify issues sooner and reinforce the company’s commitment to doing business the right way,” the statement added.

“We are pleased to move past this matter,” Todd Bloomquist, general counsel of Beam Suntory, is quoted saying in statement, adding, “Our company is committed to doing business the right way, and we take pride in our approach to resolving these issues, with integrity and transparency at every step of the process. Our company in 2012 initiated and publicly disclosed a thorough and independent investigation in cooperation with the U.S. government and took decisive corrective action. We’re confident in our ambitious growth plans in India, which are built on a business that has become a model example of success through sustainable and compliant business practices.”

The company also said that the India business was acquired by the company in 2006, and that the   matter at issue predates the acquisition of the company by Suntory Holdings in 2014.

“In 2018, the company announced an agreement to resolve issues related to the same conduct with the U.S. Securities & Exchange Commission (SEC), and the SEC publicly recognized the company’s self-disclosure, cooperation and remedial efforts. The agreement with DOJ, together with the SEC resolution, finally resolves the U.S. government’s investigations into conduct of the company and the India subsidiary that was disclosed in 2012. The DOJ agreement requires the company to pay a fine of approximately $19.6 million and recognizes the company’s cooperation with DOJ’s investigation,” the Beam statement said.