Cadbury India Limited ("Cadbury India"), Indian subsidiary of Cadbury Limited ("Cadbury"), allegedly built a major plant in Baddi, Himachal Pradesh, India allegedly to support its chocolate and other confectionery manufacturing operations in 2005.
Few years later, in 2008, when Cadbury Indian allegedly decided to increase its production capacity in the same plant, it allegedly estimated that the expansion would require more than 30 different licenses and approvals. In early 2010, Cadbury India allegedly retained an agent to interact with Indian government officials to obtain these licenses and approvals. In doing so, Cadbury India allegedly failed to conduct appropriate due diligence on, and monitor the activities of the agent, allegedly leading to creation of the risk that funds paid to the agent could be used for improper or unauthorized purposes. For example, between February 2010 and July 2010, the agent submitted five invoices totaling USD 110,446 to Cadbury India for “providing consultation, arrange statutory/government prescribed formats of applications to be filed for the various statutory clearances, documentation, preparation of files and the submission of the same with govt. authorities” for specific licenses. However, in actuality, these transactions for license applications were allegedly completed by Cadbury India employees, not the agent. Upon receiving the invoice payments, the agent allegedly withdrew most, if not the entire amount, in cash. Neither documentary support nor written contract with the agent were allegedly received by Cadbury India.
Furthermore, Cadbury India's books and records allegedly did not accurately and fairly reflect the nature of the services rendered by the agent and Cadbury allegedly did not implement adequate U.S. Foreign Corrupt Practices Act ("FCPA") compliance controls at its subsidiary, Cadbury India.
On 2 February 2010, Kraft Foods Inc. ("Kraft") acquired Cadbury and its subsidiaries, including Cadbury India, in a deal valued at about USD 19 billion. Pre-acquisition due diligence, including anti-corruption due diligence, was allegedly not conducted. Following the acquisition, between April 2010 and December 2010, Kraft allegedly engaged in substantial, risk-based, post-acquisition compliance-related due diligence reviews of Cadbury’s business in 24 countries, including India. This post-acquisition due diligence review, however, allegedly did not identify the relationship between the agent and Cadbury India.
In October 2010, Kraft allegedly required the termination of the relationship between Cadbury India and the agent and no further payments were made.
On 1 October 2012, Kraft changed its name to Mondelēz International, Inc ("Mondelēz") after spinning off its North American grocery business. Mondelēz retained the global snacking business, including Cadbury India which later became Mondelēz India Foods Private Ltd.
In 2011, the Directorate General of Central Excise Intelligence ("DGCEI") initiated an investigation into Cadbury for alleged tax evasion. DGCEI announced that Cadbury evaded about USD 46 million in taxes at a manufacturing unit in Himachal Pradesh state in the fiscal year through March 2011 by manipulating invoices and other documents to claim 'area-based exemption' for the unit even before it came into existence.
Following the completion of its investigation, Cadbury received a show-cause notice from the DGCEI demanding about Rs 574 crore towards alleged excise duty evasion, including Rs 231.47 crore for the period from 28 July 2010 to 31 January 2013, Rs 111.36 crore for the period from 1 February 2013 to 31 December 2013 and a penalty of Rs 231.47 crore. Although Cadbury contested the demand to the central excise office of Chandigarh, the central excise office issued an assessment-cum-demand notice to Cadbury, in March 2015, upholding the demands raised by the DGCEI. Furthermore, a penalty of Rs one crore has also been imposed against Anand Kripalu, Managing Director of Cadbury for allegedly violating central excise rules and penalties of several lakhs of rupees have been imposed on few present and former employees of Cadbury. Mondelez India has appealed this order.
According to media reports, the CBI investigation into Mondelēz is expected to end in April 2017.
The Department of Justice began its investigation into Mondelēz in 2010, when a whistleblower alerted both the DOJ and the SEC. A team from the DOJ is expected to travel to India at the end of April 2017 to interview former and current employees of Mondelēz India. It has also been reported that the investigation would likely end at the end of April 2017.
On 1 February 2011, Mondelēz received a subpoena from the U.S. Securities and Exchange Commission ("SEC") in connection with an investigation under the FCPA relating to a Cadbury facility in India that Mondelēz acquired. The subpoena requested information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of the facility.
In October 2015, the Wall Street Journal reported that the SEC is preparing civil charges against Mondelēz and the parties are in settlement talks in connection to the Cadbury investigation. The charges involve company's failure to maintain internal safeguards against bribery and to keep accurate books and records.
On 11 February 2016, Mondelēz received a Wells notice indicating that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the books and records and internal controls provisions of the Exchange Act in connection with the investigation. Mondelēz intend to make a submission to the staff of the SEC in response to the notice.
On 6 January 2017, Cadbury and Mondelēz, without admitting or denying the SEC's findings, entered into cease-and-desist order to settle the charges that both companies violated the internal controls and books and records provisions of the FCPA. As part of the settlement, Mondelēz agreed to pay a civil penalty in the amount of USD 13 million to the SEC.