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SEC slaps $16 mn fine on Diageo for bribery

Press Trust of India  |  Washington 

Spirits maker Diageo Plc has paid a penalty of over $16 million to US market regulator SEC for settling charges of indulging in corrupt practices in India, Thailand and South Korea.

Saying that the company takes Securities Exchange Commission's (SEC) findings on corrupt practices "seriously", Diageo said it has strengthened systems and controls to prevent such incidents in the future.

SEC imposed a fine of over $16 million on Diageo for being involved in bribery acts in -- India, Thailand and South Korea -- to obtain lucrative sales and tax benefits in these countries.

"Diageo takes the SEC's findings seriously and regrets this matter. Systems and controls have been enhanced in an effort to prevent the future occurrence of such issues...," the firm said in a statement.

The company said it has agreed for the settlement with SEC, related to potential violations of the US Foreign Corrupt Practices Act (FCPA).

"Under the settlement, Diageo has agreed to pay $13,373,820 to the SEC in disgorgement of profits and pre-judgment interest; to pay a $3 million penalty to the SEC and to cease and desist from committing any further violations of the books and records and on internal controls provisions of the FCPA," the statement noted.

In an order dated July 27, SEC said it had slapped 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 authorising 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), which sells well-known brands such as Johnnie Walker whisky and Smirnoff vodka.

"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," SEC said.

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First Published: Fri, July 29 2011. 21:08 IST