• London-based Diageo, the maker of popular liquor brands such as Johnnie Walker scotch and Smirnoff vodka, has agreed to pay more than $16 million to settle an administrative action brought by the Securities and Exchange Commission ("SEC") for violations of the books and records and internal control provisions of the FCPA.

Conduct

  • From 2003 to 2009, Diageo paid $1.7 million in bribes to hundreds of Indian government officials responsible for purchasing or authorizing the purchase of its products in the country.
  • From 2004 to 2008, Diageo similarly paid nearly $600,000 (approximately $12,000 per month) to a Thai government official for his consulting assistance on Diageo's behalf in tax and customs disputes.
  • Diageo likewise made nearly $200,000 in payments to South Korean customs officials for their roles in influencing government decisions to grant Diageo tax rebates and for travel and entertainment expenses connected with the negotiations leading up to the government's favorable decisions. Diageo also made hundreds of cash payments totaling more than $230,000 to South Korean military personnel to obtain and retain their business.

Penalty

  • Diageo agreed to the disgorgement of $11,306,081, prejudgment interest of $2,067,739, and an additional $3 million penalty.

Notes

  • Uncharacteristically, the Department of Justice ("DOJ") opted not to press criminal charges against Diageo for its alleged FCPA violations.
  • Also uncharacteristic is the SEC's decision to pursue an administrative action against Diageo, as opposed to a more typical civil enforcement action filed in federal court.
  • Diageo undertook a series of remedial measures in response to the investigation, including the termination of the responsible employees and implementing enhancements to its internal compliance program.
  • The SEC observed that Diageo's rapid multinational expansion through mergers and acquisitions left it particularly vulnerable to FCPA violations; Diageo failed to improve the lax compliance policies of a number of its acquired subsidiaries until illicit payments had already been made.