On July 2, 2018, Chicago-based spirits maker Beam Suntory Inc. (“Beam Suntory” or the “Company”) agreed to pay $8.2 million to settle Foreign Corrupt Practices Act (“FCPA”) claims brought by the Securities and Exchange Commission (“SEC”) for allegedly improper payments by its Indian subsidiary. In the Matter of Beam Inc., N/K/A Beam Suntory Inc. Admin Proc. File No. 3-18568 (July 2, 2018). This settlement reportedly follows Beam Suntory’s voluntary self-disclosure of the underlying issues to both the SEC and the Department of Justice (“DOJ”); however, there has been no reported resolution by the DOJ.

According to the SEC’s order instituting proceedings, from 2006 through 2012, Beam Suntory’s Indian subsidiary allegedly used third-party sales promoters and distributors to make illicit payments to government employees. The alleged purpose of such payments was to “increase sales orders, get better positioning on store shelves, process and secure license and label registrations, and facilitate the distribution of Beam India’s spirit products from its bottling facility to warehouses in other states.” The SEC contended that the Indian subsidiary reimbursed the third-parties for the illegal payments through fabricated or inflated invoices, and then falsely recorded the expenses, and further alleged that the Indian subsidiary’s management knew of and orchestrated the scheme.

The SEC’s order also faulted Beam Suntory for allegedly failing to remediate known deficiencies in a timely manner. According to the SEC, in 2010, Beam Suntory engaged a global accounting firm to conduct a compliance review of Beam India, and that firm reported that certain Beam Suntory India executives believed that promoters were likely making “grease payments” to government officials in India, which findings were allegedly confirmed by Indian law firms retained by Beam Suntory in 2011. According to the SEC, Beam Suntory did not adopt the recommendations from these firms in 2011.

In 2012, however, Beam Suntory did voluntarily self-disclose that it had begun an investigation of practices at its Indian operation, saying at the time that it had informed the SEC and the DOJ of the probe. And it appears that from the point forward, it cooperated fully with the SEC, as the SEC credits its subsequent cooperation and remedial efforts (including the decision by Beam Suntory, among other things, to cease operations in India until it could be confident that it could operate there compliantly). The SEC brought its allegations under the FCPA’s books and records provisions, Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange Act”). Beam Suntory resolved the SEC’s claims without admitting or denying the allegations. The $8.2 million payment consisted of disgorgement of $5.26 million, prejudgment interest of approximately $917,000, and a civil penalty of $2 million.

The SEC’s order did not mention, and news sources did not report, a parallel resolution with the DOJ. It is possible that DOJ has declined to prosecute, consistent with the DOJ’s FCPA new Corporate Enforcement Policy, which went into effect on November 29, 2017. Under the Policy, when a company adequately voluntarily self-discloses, cooperates, and remediates, a presumption will arise that the matter will be resolved through a declination, rather than an enforcement action (although the company still may be required to pay disgorgement, forfeiture, or restitution). See Shearman & Sterling LLP, Deputy Attorney General Rod Rosenstein Announces Revised FCPA Corporate Enforcement Policy, Need-to-Know Litigation Weekly, Dec. 5, 2017. Or it is possible that a resolution with the DOJ is still forthcoming.

In re Beam Inc., AP File No. 3-18568 (S.E.C. July 2, 2018)