Indian official bribed by US company for license approval: Department of Justice



An American spirit maker has agreed to pay USD 19.5 million to settle a bribery probe in the US after the Department of Justice alleged that it paid a bribe of Rs 10 lakh to a senior Indian government official for the approval of a license to market and sell its ready-to-drink products in India.

According to its admissions, from the time Chicago-based company 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.

The Department of Justice (DoJ) alleged that Beam Suntory Inc. (Beam) had a scheme to pay bribes to an Indian government official in exchange for the approval of a license to bottle a line of products that Beam sought to market and sell in India.

This among others 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.

Beam and its Indian subsidiary not only paid bribes to Indian government officials, they intentionally failed to implement internal controls to prevent bribery and falsified their books and records to conceal the corrupt activity, Acting Assistant Attorney General Brian C Rabbitt of the Justice Department's Criminal Division said.

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According to its admissions, Beam conspired with others to violate the Foreign Corrupt Practices Act (FCPA) by, among other things, engaging in a scheme to pay a bribe of Rs 1 million (approximately equal to USD 18,000 at the then exchange rate) 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. (Beam India).

Companies that use corrupt influence instead of competing in a fair, ethical, and honest manner should take note of today's agreement: paying bribes to obtain and retain business is not business as usual, it is a crime, Rabbitt said in a statement.

U.S. companies that attempt to gain the upper hand in foreign business ventures by engaging in corruption must be held accountable, said U.S. Attorney John R. Lausch Jr. for the Northern District of Illinois. The Foreign Corrupt Practices Act has a long reach and for good reason. It is critical that our global economy remains on a fair playing field.

The Department of Justice press release did not name the Indian official or officials who allegedly received the bribes.

The bribe was authorised 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, the DoJ alleged.

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 (Rajasthan's Alwar) bottling facility to warehouses in other states throughout India.

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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 detect and halt Beam India's longstanding practice of making corrupt payments to Indian government officials and to falsify its books and records.

On numerous occasions, Beam was cautioned by outside advisors on the need to implement sufficient internal accounting controls relating to risks associated with improper activities by third parties in India, but Beam failed to implement sufficient controls.

The company also maintained falsely recorded expenses, including corrupt payments concealed as commission expenses, and falsified certifications, including false sub-certification letters submitted under the Sarbanes-Oxley Act of 2002 in its consolidated books, records and accounts, according to the DoJ press release.

In July 2018, in a related matter with the US Securities and Exchange Commission (SEC), Beam agreed to pay the SEC disgorgement and prejudgment interest totalling approximately USD 6 million and a civil monetary penalty of USD 2 million but the department is not crediting any portion of the penalty paid to the SEC because Beam did not seek to coordinate a parallel resolution with the department.

In a statement, Beam's general counsel Todd Bloomquist said that the company began cooperating with the US government in 2012 and took corrective action, including temporarily suspending its India operations and terminating employees who violated the company's code of business conduct and ethics, Chicago Tribune reported.

Company spokeswoman Emily York declined to say whether the five executives and employees referred to in court documents were terminated.

The deferred prosecution agreement refers to the involvement of two executives in Beam's Asia Pacific/South America unit, one executive and one high-ranking employee in Beam's legal department and an executive of Beam India, but does not name them. The company continues to do business in India and has about 225 employees there, the report quoted York as saying.