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Board and Fraud is a blog that aims to bring a practical approach to issues facing the board of directors and the audit committee specifically in the area of governance, risk management, compliance, and internal audit, with a strong focus on fraud, ethics, and internal controls.

Beam FCPA Settlement – Third Parties were used to Fund the Bribery Schemes

Beam Inc., n/k/a Beam Suntory Inc. is a corporation organized under the laws of the state of Delaware and headquartered in Chicago, Illinois, agreed with the SEC and pay $8.18 million (disgorgement of $5,264,340, prejudgment interest of $917,498, and a civil monetary penalty of $2,000,000) to settle FCPA violations in India.

No surprise the bribery involved pervasive third party schemes that were funded through the submission of inflated invoices from the promoters, often for inflated per-case commissions. The illicit payments, made with the knowledge, authorization, and complicity of Beam India’s management.

The illicit payments were falsely characterized in Beam India’s books and records as legitimate business expenses for “Customer Support,” “Off-Trade Promotions,” “Commission to Distributor/Promoter,” and “Commercial Discount, Ongoing” which disguised the true nature of these payments. Ultimately, the related expenses were consolidated in Beam’s general ledger system coded as “Selling and Distribution Expenses.”

For a primer on third party risk management click here.

Your thoughts and opinions are always appreciated.

Jonathan

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