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Issues To Consider From The Beam Enforcement Action


This post highlighted the SEC’s recent $8.2 million FCPA enforcement action against Beam Inc. (now known as Beam Suntory Inc.) concerning conduct in India. This post continues the analysis by highlighting additional issues to consider.

Time Line

As highlighted in this prior post, Beam was under FCPA scrutiny since late 2012. Thus from start to finish, its FCPA scrutiny lasted approximately 6 years.

If the SEC/DOJ want the public to have confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker. The validity and credibility of FCPA enforcement depends on this. Having FCPA scrutiny linger for approximately six years is inexcusable particularly since Beam, in the words of the SEC:

“In determining to accept the Offer, the Commission considered Respondent’s self disclosure, cooperation, and remedial efforts. Beam voluntarily disclosed this misconduct to the Commission staff and timely shared the facts developed during the course of an internal investigation by a special committee of its board. Beam also cooperated by voluntarily producing documents, summarizing its factual findings, translating numerous key documents, providing timely reports on witness interviews, and making current or former employees available to the Commission staff, including those that needed to travel to the United States or elsewhere for interviews.”

Root Causes

It has been highlighted numerous times on these pages.

The root cause of many FCPA enforcement actions are foreign trade barriers and distortions.  The narrative is rather simple.

  • Trade barriers and distortions create bureaucracy.
  • Bureaucracy creates points of contact with foreign officials.
  • Points of contact with foreign officials create discretion.
  • Discretion creates the opportunity for a foreign official to misuse their position by making bribe demands.

The following is not meant to excuse the conduct at issue in the Beam enforcement action, only to put it in the proper perspective.

Why did Beam become the latest alcoholic beverage company to resolve an enforcement action concerning conduct in India (see here for the Diageo enforcement action and here for the ABInBev enforcement action)? Because, like in those prior actions, the sector is heavily regulated by the government.

For instance, in the Beam matter we learn that:

“In India the alcoholic beverage industry is highly regulated by government authorities. Beam India, and third parties acting as agents on its behalf, had numerous interactions with government officials related to importation of distilled mixes for its spirit products, shipments to its bottling facility in Behror, Rajasthan, various inspections of the Behror plant, shipments from the factory in Behror to distribution warehouses in multiple states in India, label registrations required to distribute each brand of liquor in each state, licensing of warehouses in states prior to retail distribution, and sales to retail stores that were operated by the Indian government. Introduction of new spirit products and distribution warehouses required new applications for label registrations and licensing of the warehouses in each state. Label registrations and warehouse licenses also required yearly renewal in Rajasthan and in the twenty-six Indian states where Beam sold its products or had warehouses.”

If Beam could introduce new products, produce products, and otherwise engage in its business without government regulation and interference, the FCPA enforcement action (like the prior enforcement actions concerning alcoholic beverage companies doing business in India) likely would not have occurred.

In short, the way to reduce bribery is not just to bring more corporate enforcement actions.  Rather, it is to address the root causes of bribery by seeking a reduction in trade barriers and distortions.


One aspect of compliance best practices is monitoring including paying attention to what is going on in the industry.

In this regard, the Beam enforcement action mentions:

“Before the U.S. law firm completed its review [of Beam’s India business], the firm forwarded to Beam’s general counsel’s office a July 2011 SEC enforcement action concerning FCPA violations by Diageo plc in India. Diageo, a direct competitor of Beam’s in the Indian spirit markets, had settled an SEC administrative action related to, among other conduct, payments made through its third-party promoters to Indian government officials to obtain increased spirit orders in government sales channels and to secure initial and annual label registrations and other administrative approvals critical to Diageo’s business in India. Beam subsequently sent a lawyer from its General Counsel’s office to India to interview senior Beam India management to ask whether similar conduct was occurring at Beam India and to provide additional FCPA training. Thereafter, that lawyer revised Beam India’s agreements with its customs house agent and third-party promoter in the CSD channel, the largest revenue channel for Beam India, and used those agreements as templates for agreements with other third parties in India.”

No-Charged Bribery Disgorgement

The Beam enforcement action is the latest example (of numerous prior examples) of the SEC seeking a disgorgement remedy in the absence of FCPA anti-bribery charges or findings. Specifically, the $8.2 million settlement amount in the action, which found books and records and internal controls violations, consisted of the following: disgorgement of $5,264,340, prejudgment interest of $917,498, and a civil monetary penalty of $2 million.

As highlighted in this previous post (and numerous prior posts thereafter), so-called no-charged bribery disgorgement is troubling.

Among others, Paul Berger (here) (a former Associate Director of the SEC Division of Enforcement) has stated that “settlements invoking disgorgement but charging no primary anti-bribery violations push the law’s boundaries, as disgorgement is predicated on the common-sense notion that an actual, jurisdictionally-cognizable bribe was paid to procure the revenue identified by the SEC in its complaint.” Berger noted that such “no-charged bribery disgorgement settlements appear designed to inflict punishment rather than achieve the goals of equity.”

Kokesh Only Matters to the Extent Companies Don’t Roll Over and Play Dead

The disgorgement amount in the Beam enforcement action was troubling for another reason.

As highlighted here, in June 2017 the Supreme Court unanimously held in SEC v. Kokesh that disgorgement is a penalty and thus disgorgement actions must be commenced within five years of the date the claim accrues. However, as highlighted in this post, Kokesh, not to mention other Supreme Court decisions and other legal principles, only matter to the extent companies under FCPA scrutiny do not roll over and play dead.

The Beam action concerned alleged conduct that took place between 2006 and 2012. In other words, 6-12 years prior to the enforcement action.

In short, Kokesh is not going to matter one bit if companies role over and play dead when under FCPA scrutiny and presumably Beam did what most companies under FCPA scrutiny do: either waive or toll statute of limitation defenses. As highlighted in this previous guest post from a former SEC Enforcement Division attorney and DOJ Fraud Section prosecutor, issuers simply need to stop doing this.

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