Mondelez International, a beverage and snack-food company, has agreed to pay $13 million in civil penalties to the Securities and Exchange Commission for violations of the Foreign Corrupt Practices Act.
In 2010, Mondelez acquired Cadbury, a U.K.-based confectionary and snack beverage company that had securities registered with the SEC. In 2010, Cadbury India, a subsidiary of Cadbury, retained an agent to interact with Indian government officials to obtain licenses and approvals for a chocolate factory in India.
Cadbury India’s failure to conduct appropriate due diligence on, and monitor the activities of, the agent “created the risk” that funds paid to the agent “could be used for improper or unauthorized purposes,” according to the SEC administrative proceeding. In addition, Cadbury India’s books and records, which were consolidated into the books and records of Cadbury, “did not accurately and fairly reflect the nature of the services” rendered by the agent, the SEC said.
According to the SEC administrative proceeding, “Cadbury did not devise and maintain an adequate system of internal accounting controls sufficient to provide reasonable assurances that access to assets and transactions were executed in accordance with management’s authorization and specifically to detect and prevent payments that may be used for improper or unauthorized purposes.”
As a result, Cadbury violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. “As a result of Mondelez’s subsequent acquisition of Cadbury’s stock,” the SEC said, “Mondelez is also responsible for Cadbury’s violations.”