Have any Questions?


May 30, 2022 View:

Pennsylvania Suntory fined $19.57 million for bribery offenses

Recently, Beam Suntory has agreed to pay a fine of $19.57 million, or about $128.6 million, to settle an investigation into bribing government officials at its Indian subsidiary.

Image courtesy of: Wine Business Watch

Bin Suntory reached an agreement with the U.S. Department of Justice (DOJ) to end the government"s investigation into bribery by the beverage group and its Indian subsidiary, which was first disclosed in 2012.

For bribery violations of the U.S. Foreign Corrupt Practices Act (FCPA), the company will pay a criminal fine of $19.57 million. Suntory received a 10 percent reduction in the fine for cooperating with the U.S. Department of Justice's investigation.

Investigation results show that the subsidiary was involved in bribery several years ago

Back in 2018, Bin Suntory paid $8.2 million to settle a related civil claim with the U.S. Securities and Exchange Commission (U.S. Securities and Exchange Commission).

The settlement agreement reveals that between 2006 and 2012, since the acquisition of the Indian business by Bin Suntory, the subsidiary paid bribes to Indian officials, primarily through third-party sales promoters and distributors, for the company's sales and distribution operations in India.

In one case, the Indian subsidiary of Pinsent Masons paid a bribe of 1 million Indian rupees, or about $18,000 ($118,000) at the time, to a senior Indian official in exchange for approval to bottle the company's ready-to-drink products.

Prosecutors said the bribe was authorized by an executive in Pensanteria's Pacific and South American business units, and that the executive tried to conceal the payment by paying it through a third-party bottler in the Indian branch.

The criminal fines imposed on Bin Suntory are attributed to two factors

According to prosecutors, the criminal fines imposed on Bin Suntory are attributed to two aspects. The first aspect is that multiple executives were involved based on bribery. The involvement of two previous Pinsent Masons executives, one in Pinsent Masons' legal department and the other in Pinsent Masons' Indian subsidiary, both added to the seriousness of the case.

The other side of the coin is that it stems from its own lack of attention. Despite numerous warnings from outside advisors, Bin Suntory also failed to take steps to stop the practice and control internal accounting systems, and also falsely recorded bribes as commission fees and refused to accept responsibility for bribery allegations.

Not only did Bin Suntory and its Indian subsidiaries pay bribes to Indian government officials, they deliberately failed to implement internal controls to prevent bribery and falsified books and records to conceal corrupt activities, the U.S. Department of Justice said.

The prosecution agreement was delayed for three years and was opened in the U.S. District Court for the Northern District of Illinois on Oct. 27. As part of the deferred agreement, Penn Suntory will continue to cooperate with the department in criminal investigations related to the company. In addition, the agreement provides that Penn Suntory will enhance its compliance program and report to it on its implementation.

Image courtesy of: Wine Business Watch

In response to the findings of this survey, Bin Suntory responded

Todd Bloomquist, general counsel for Pennsylvania Suntory, said the company is happy to put the matter behind it. Our company is committed to doing business the right way, and we are proud of the way we have addressed these issues, maintaining integrity and transparency at every step of the process, he said.

Bin Suntory said it has terminated employees who violated the company"s code of business conduct and ethics and suspended all business activities in India until it is confident that the company can operate in compliance. The company also said it has implemented strict controls and strengthened its global compliance function to identify issues quickly. Binzantri employs about 300 people in India and has offices in Gurgaon, New Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and a major bottling plant in Rajasthan.

The company has set a billion-dollar target for India by 2030, the company's CEO said. Last year, the company appointed Praveen K Kadle as an independent director and chairman of the board of directors of the company's India unit.