SEC slaps $16 mn fine on Diageo for bribery

US market regulator SEC has slapped penalties of over $16 million on spirits giant Diageo Plc for indulging in corrupt practices in India, Thailand and South Korea to push up sales of its leading brands like Johnnie Walker.

In an order, the Securities Exchange Commission (SEC) said it imposed the penalty on Diageo Plc, which through its subsidiaries, made illegal payments of over $2.7 million to various government officials in the three countries.

Detailing out the corrupt practices of the company, SEC said: "In India, from 2003 through mid-2009 Diageo made over $1.7 million in illicit payments to hundreds of Indian government officials responsible for purchasing or authorizing the sale of its beverages."

"Increased sales from these payments yielded more than $11 million in ill-gotten gains," it added. The company operates in India through its subsidiary, Diageo India (DI) Pvt Ltd.

"For many years Diageo engaged in a pervasive practice of making illicit direct and indirect payments to government officials throughout India to obtain and retain liquor sales.

As a result Diageo was unjustly enriched by $11.3 million from increased sales," it said.

Among other illegal practices, SEC said: "Diageo through DI, reimbursed an estimated $5,30,955 and made plans to reimburse an additional $79,364 in improper cash payments

made by third party sales promoters to government employees of the Indian military's Canteen Stores Department."

According to SEC, Diageo also made illegal payments to employees of government liquor stores as well as label registration and excise officials.

Comments from the company's Indian arm could not be obtained despite repeated attempts.

Diageo sells brands such as Johnnie Walker whisky and Smirnoff vodka, among others in India.

In March, Kraft Foods had said the US market regulator was probing the company for possible corrupt practices in India by its arm Cadbury.

Regarding the corrupt practices of Diageo, SEC said the illegal payments were made to obtain lucrative sales and tax benefits in the three countries.

The total financial penalty of over $16 million includes disgorgement and prejudgement interest expenses of $11.3 million and $2 million respectively.

Besides, SEC also asked the company pay a civil money penalty of $3 million within a month of the order, which was passed on July 27.