Media reports on 11 October 2012 revealed that the U.S. Department of Justice is investigating possible FCPA violations by Beam Inc's Indian subsidiary, Beam Global Spirits & Wine (India) Private Limited ("Beam India"). The reports allege that Beam India has put its Asia Pacific management team in charge of the investigation, and has asked local senior management, including the managing director Harish Moolchandana, not to report to work while the investigation is ongoing. Allegations include excise duty violations and invoicing irregularities. The reports indicate that the subsidiary's top sales and finance executives and regional sales directors are under investigation. In an unpublished communication, Beam spokesman Clarkson Hine is reported to have written: "Based on a routine internal audit of operations in India, we are taking a closer look at the actions of certain individuals and practices in the India business."
About 22% of the Company's net sales are attributable to its APSA division, which includes Australia, India and China, among others; unusually for such companies, in 2011 and 2012 the company's sales have grown faster in India than in China.
On 8 November 2012, Beam filed its SEC Form 10-Q, and explained,
"As a result of information obtained through our internal compliance procedures and an internal audit of our India business, we commenced an investigation into whether the business has been conducted in compliance with Company policies and applicable law, including the Foreign Corrupt Practices Act. We have voluntarily notified the U.S. Department of Justice ('DOJ') and the Securities and Exchange Commission ('SEC') of our investigation and intend to cooperate fully with the DOJ and SEC. We are presently unable to predict the duration, scope or result of the internal investigation or of any potential investigations by the DOJ or the SEC. At this time, we also cannot reasonably estimate the potential liabilities that may result from this matter, and no accruals for these potential liabilities have been established as of September 30, 2012. However, it is reasonably possible that such liabilities could have a material impact on our results of operations, cash flows or financial condition. In addition, the ongoing conduct of the investigation and our implementation of remedial measures are likely to have a disruptive effect on our India business over the near term.
A substantially similar statement appeared in Beam's Form 10-K submitted to the SEC on 26 February 2013.
02 July 2018 - The SEC's administrative cease-and-desist order revealed more details about Beam India's bribery scheme. Apparently, from 2006 - 2012, the company -- with senior management's knowledge and authorization -- made improper payments both directly and via third party agents to various Indian government officials to acquire and maintain business throughout India. For example, Beam India is said to have paid one excise official USD 18,000 (yearly salary equivalent) to approve a label registration for Beam India.
Beam India would fabricate third party invoices to provide for the illicit payments to the third parties and would falsely record such expenses as "customer support", "off-trade promotions" etc. Certain Beam India finance executives maintained off-the-books accounts that tracked amounts and uses of the funds provided to promoters. For example, over the period, Beam India paid more than $1.5 million to its promoter in the CSD channel and over $550 thousand to its promoter in the state of Delhi to make improper payments to government officials at government-controlled retail stores and depots in those markets.
Beam India's books were consolidated with Beam Inc's, and Beam Inc. failed to maintain a sufficient system of internal accounting controls.
02 July 2018 - the SEC issued an administrative order with the consent of Beam to conclude its investigation into alleged FCPA violations stemming from Beam’s subsidiary, Beam Global Spirits & Wine (India) Private Limited (“Beam India”).
The SEC found that from 2006 to 2012, Beam India made improper payments to various Indian government officials directly and via third party agents in order to acquire and retain business in India; that Beam India did not accurately reflect these payments in its books and records (which were consolidated into Beam’s); and that Beam failed to (1) maintain sufficient internal accounting controls to detect and prevent such improper payments, and (2) failed to timely remediate deficiencies. Beam didn't admit or deny the SEC's findings.
The SEC ordered Beam to cease and desist from committing any future violations of Sections 13(b)(2)(A) & (B) of the Exchange Act and to pay a total of approximately US$ 8 million (disgorgement of US$ 5.26 million; prejudgment interest of US$ 917,498; and a civil penalty of USD 2 million).