Bribes, falsified records cost Beam Suntory $19.6M in FCPA settlement

According to court documents unsealed Tuesday, from 2006 through 2012, Beam India paid bribes and made other improper payments to various Indian government officials in order to obtain or retain business in the Indian market. Further, senior executives at Beam India directed these schemes using third-party sales promoters and distributors.

“Companies that use corrupt influence instead of competing in a fair, ethical, and honest manner should take note of today’s agreement: paying bribes to obtain and retain business is not business as usual, it is a crime.”

Acting Assistant Attorney General Brian Rabbitt

Beam entered into a three-year deferred prosecution agreement (DPA) with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Northern District of Illinois for violating the anti-bribery, internal controls, and books and records provisions of the FCPA. As part of the DPA, Beam agreed to continue to cooperate with the Department in any ongoing or future criminal investigations concerning the company, its executives, employees, or agents.

The DOJ deemed the appointment of an independent compliance monitor at Beam unnecessary.

“We are pleased to move past this matter,” said Beam Suntory General Counsel Todd Bloomquist in an emailed statement. “Our company is committed to doing business the right way, and we take pride in our approach to resolving these issues, with integrity and transparency at every step of the process.”

Compliance takeaways

As described in the statement of facts, Beam “engaged in the falsification of books and records to conceal improper payments and the willful failure to implement an adequate system of internal controls, which included 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 that presented corruption risks.”

On numerous occasions, outside advisors warned Beam about the need to implement internal accounting controls relating to risks associated with improper activities by third parties in India—warnings the company ignored. “Beam also maintained falsely recorded expenses, including corrupt payments concealed as commission expenses, and falsified certifications, including false sub-certification letters submitted under the Sarbanes-Oxley Act of 2002, in its consolidated books, records, and accounts,” the DOJ noted.

“Beam and its Indian subsidiary not only paid bribes to Indian government officials, they intentionally failed to implement internal controls to prevent bribery and falsified their books and records to conceal the corrupt activity,” said Acting Assistant Attorney General Brian Rabbitt of the Criminal Division in a press release. “Companies that use corrupt influence instead of competing in a fair, ethical, and honest manner should take note of today’s agreement: paying bribes to obtain and retain business is not business as usual, it is a crime.”

While the criminal penalty reflects a 10 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range for Beam’s remediation and cooperation with the government’s investigation, Beam also did several things wrong that should be of note to general counsel and compliance officers, including:

• Failing to disclose the misconduct that triggered the investigation in a timely manner;
• Failing to have an effective compliance program at the time of the misconduct;
• Failing to fully cooperate;
• Refusing to accept responsibility for several years; and
• Failing to fully remediate, including its failure to discipline certain individuals involved in the conduct.

However, Beam agreed to enhance its compliance program and report to the government on the implementation of the enhancements. Among the remedial measures the company has taken, according to the DPA, include “suspending operations in India for a period of time; implementing enhanced controls including additional controls over disbursements and interactions with government officials; requiring in-person compliance training for employees; hiring a chief compliance officer, as well as a regional compliance officer; and hiring new management in India.”

In July 2018, through a cease-and-desist order, Beam reached a related $8 million settlement with the Securities and Exchange Commission, including $6 million in disgorgement and prejudgment interest and a civil penalty of $2 million. But the Fraud Section is “not crediting any portion of the penalty paid to the SEC because Beam did not seek to coordinate a parallel resolution with the Department.”