October 27, 2020

Liquor manufacturer settles FCPA investigation by DOJ

On October 27, 2020, the US Department of Justice announced the settlement of a Foreign Corrupt Practices Act investigation of Beam Suntory Inc., a maker of distilled beverages headquartered in Chicago, Illinois.  Beam agreed to a three-year deferred prosecution agreement and the payment of a criminal fine of $19,572,885 to resolve a charge of one count of conspiracy to violate the anti-bribery, books and records, and internal controls provisions of the FCPA.

According to Beam’s admissions, the Company conspired with others to bribe government officials in India from 2006, when it acquired Beam Global Spirits & Wine (India) Private Ltd., until 2012 in order to secure approvals for bottling licenses in India, obtain orders of Beam products by government-controlled stores and prominent placement of Beam’s products in those stores, and acquire and renew product registrations and licenses.  According to the criminal information, most of the corrupt payments were made through “third-party sales promoters and distributors.”  Beam India attempted to cover up the payments by maintaining off-the-books accounts and by arranging for the third parties to submit inflated or fictitious invoices.  These false payments were then consolidated into Beam’s books and records.  According to the information, despite multiple red flags as to the existence of these improper payments, Beam knowingly failed to implement appropriate internal accounting controls, and, in particular, controls over payments to third parties.  As an example, the information described an email from a member of Beam’s legal department in which that individual, in discussing an upcoming compliance review, stated that the review would be conducted “with the understanding that a U.S. regulatory regime should not be imposed” and that the review should take into account “India [sic] customs and ways of doing business.”

In determining the penalty assessed by the DPA, the DOJ concluded Beam should receive only partial cooperation credit.  Although the company made factual presentations to the government, produced documents from foreign countries, and made foreign-based employees available for interviews, the Company, at times, took “positions . . . that were not consistent with full cooperation” and refused to accept responsibility for “several years.”  Beam did not receive any voluntary disclosure credit because, shortly before the Company disclosed the conduct to the DOJ, an employee sent an email to US and Indian authorities, as well as to the Company, describing “illegal cash transactions” involving Beam’s distributors. 

The Company also did not receive full credit for its remediation, which included enhancing controls, hiring a dedicated chief compliance officer and a regional compliance officer, hiring new management in India, and suspending operations in India for a period of time, because the Company did not discipline certain individuals involved in the criminal conduct.  Despite this conclusion, the DOJ determined that because Beam had enhanced its compliance program and internal controls, and because it had committed to continue these improvements, an independent compliance monitor was not required.  Beam is required to report annually to the DOJ on Beam’s remediation and enhancements to its compliance program.

Lastly, in assessing the appropriate criminal fine, the DOJ determined that although Beam had no prior criminal history, the criminal conduct was serious.  The DOJ highlighted Beam’s “willful failure” to implement adequate internal controls, including specifically calling out the “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.

The settlement with the DOJ comes over two years after Beam settled an investigation conducted by the US Securities and Exchange Commission into the same conduct.  In July 2018, Beam consented to the entry of a cease and desist order and agreed to pay a civil penalty of $2 million, disgorgement of $5,264,340, and prejudgment interest of $917,498.  Notably, the DOJ stated that the penalty paid to the SEC in 2018 would not be credited against the criminal fine because Beam did not seek to coordinate a parallel resolution.

DOJ press release | DPA | Criminal Information | 

SEC press release (2018) | SEC order (2018) |