Diageo subsidiaries found to have bribed hundreds of officials in Asia

Diageo subsidiaries found to have bribed hundreds of officials in Asia

The US Securities and Exchange Commission has fined Diageo US$16m for failing to stop its subsidiaries bribing officials in the emerging markets of India, Thailand and South Korea.

Diageo subsidiaries paid out bribes to gain preferential treatment in key emerging markets, the Securities & Exchange Commission (SEC) said late yesterday (27 July). This included $600,000 in payments to a Thai government official between 2004 and 2008, as well as $1.7m in "illicit payments" to hundreds of government officials in India, the SEC said. 

The Johnnie Walker distiller must pay the SEC a straight $3m fine and an extra $13.4m to compensate for estimated profits made as a direct result of bribes. The SEC has prosecuted the drinks giant under the US Foreign Corrupt Practices Act. 

"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,” said Scott Friestad, associate director of the SEC’s Division of Enforcement.

Diageo said last night that it "takes the findings seriously and regrets this matter". The group said that it has tightened supervision of subsidiaries.

"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," said the UK-based company.

Diageo has been conducting its own investigation into the matter in a number of countries.

According to its 2010 annual report, the drinks giant reported to the US SEC that two of its former employees in South Korea had been convicted for "improper payments", while one former employee and two current ones were convicted of tax evasion.

For the full SEC ruling, click here.