Beam Suntory, a global producer and distributor of distilled beverages, settled its FCPA case with DOJ for $19.5 million for bribes paid in India. 

The DOJ settlement follows an SEC FCPA settlement for $8 million announced on July 2, 2018.  The timing of the FCPA settlements is unusual and suggests that DOJ’s resolution involved unique issues relating to Beam Suntory’s cooperation. 

The SEC resolution was announced over 5 years after Beam Suntory voluntarily disclosed the matter to the SEC.  At the time the SEC settlement was announced, DOJ did not announce any resolution of its parallel investigation.

The liquor industry is heavily regulated in India and there are numerous opportunities for bribery and kickbacks.  Beam was traded on the NYSE until 2014 when it was acquired by a Japanese company and delisted from the NYSE.

In the latest DOJ settlement, Beam entered into a three-year deferred prosecution agreement (“DPA”) in exchange for a $19.5 million fine.  The criminal information filed with the DPA charged conspiracy to violate the anti-bribery, internal controls and books and records provisions of the FCPA.

DOJ did not credit Beam for voluntary disclosure even though the SEC credited for voluntary disclosure of the matter.  The Justice Department cited the fact that prior to Beam’s disclosure, DOJ received an email from a Beam employee reporting “illegal cash transactions” involving a Beam distributor in India.

Beam received partial credit for its cooperation with DOJ because it produced documents, made foreign witnesses available for interviews, and made factual presentations to DOJ during the investigation.  Beam did not receive full credit for its cooperation because it was not cooperative consistently during the investigation and delayed taking full responsibility and resolving the case.

Beam engaged in timely remediation by suspending operations in India for a period of time, enhanced controls, requiring in-person training, hiring a Chief Compliance Officer and a Regional Compliance Officer, and hiring new management in India.  Beam did not receive full credit for remediation because it did not discipline any officers or employees.

DOJ did not impose an independent corporate monitor.

Based on all of the factors, Beam received a 10 percent discount from the bottom of the US Sentencing Guidelines.

The resolution focused on Beam India’s subsidiary paid a bribe of 1 million Indian Rupees (approximately $18,000) 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.  The payment was authorized by a high-ranking Beam executives at Beam’s Asia-Pacific/South America regional business unit, who directed that the payment be made through Beam India’s third-party bottler to disguise the payment.

In addition to the single payment scheme described above, DOJ cited the fact that between 2006 and the third quarter of 2012, Beam India paid bribes to various Indian government officials.  In 2006, Beam acquired an Indian company that was engaged in bribery of Indian government officials and which continued unabated until 2012.  Most of the payments were made by third-party promoters and distributors who paid government officials to secure orders of, and prominent placement of, Beam products at government-controlled depots and retail stores.  Further, Beam India paid bribes to foreign officials to acquire and renew label registrations and licenses, and secure authorization to distribute Beam products from a bottling facility to the India states.

The payments to government officials were funded through inflated or false invoices submitted by the third parties.  Senior management directed the distribution o0f these funds to different markets in India.  Certain finance managers maintained off-the-books records of the illegal payments.  The illegal payments were falsely recorded in Beam’s books and records under a variety of expense categories.