Diageo Agrees to Pay $16 Million to Settle Corruption Claims

Diageo Plc (DGE), maker of Johnnie Walker scotch and Smirnoff vodka, will pay more than $16 million to resolve U.S. regulatory claims the firm bribed officials in South Korea, India and Thailand to win sales and tax benefits.

Units of London-based Diageo paid more than $2.7 million in bribes from 2003 to 2009, recording them as legitimate business expenses for vendors and private customers, or omitting them altogether, the Securities and Exchange Commission said today. The firm made about $11 million in profits as a result of the payments, the regulator said in an administrative order.

“For years, Diageo’s subsidiaries made hundreds of illicit payments to foreign government officials,” Scott Friestad, associate director in the SEC’s enforcement division, said in a statement. “As a result of Diageo’s lax oversight and deficient controls, the subsidiaries routinely used third parties, inflated invoices, and other deceptive devices to disguise the true nature of the payments.”

Diageo resolved the Foreign Corrupt Practices Act claims without admitting or denying wrongdoing.

Payments were made to hundreds of Indian officials who were responsible for purchasing or authorizing the sale of its beverages, the SEC said. In Thailand, bribes of about $12,000 a month were paid for four years to a government official who lobbied for the company in tax and customer disputes, according to the administrative order.

Travel and entertainment expenses were paid for South Korean officials involved in tax negotiations, the SEC said. South Korean military officials routinely got gifts from Diageo employees aiming to win or keep business, the agency said.

“Diageo takes the SEC’s findings seriously and regrets this matter,” the company said in a statement. “Systems and controls have been enhanced in an effort to prevent the future occurrence of such issues and to reinforce, everywhere the Company operates, a culture of compliance and commitment to the principles embodied in Diageo’s Code of Business Conduct.”

To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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