ANHEUSER-BUSCH INBEV SA/NV

Industry

Food and Beverage

Corporate Headquarters

Leuven, Belgium

Summary of Allegations:

Nationality of Foreign Officials: India

Summary of Allegations:

Between 2009 and 2012, InBev India International Private Limited (“IIIPL”), a joint venture between Anheuser-Busch InBev SA/NV ("AB InBev") and Indian corporation RJ Corp, allegedly used third party sales promoters to make improper payments to Indian government officials to obtain beer orders and to increase brewery hours for Crown Beers India Private Limited ("Crown"), wholly owned Indian subsidiary of AB InBev.

During the period, IIIPL allegedly managed the marketing and distribution of beer for Crown. In 2009, IIIPL allegedly hired a third party promoter with no relevant experience. Through this arrangement, the promoter allegedly received excessive commissions and reimbursements for questionable promotional charges, which were allegedly used to make improper payments to government officials at the Andhra Pradesh Beverages Corporation Limited, a state controlled entity that sells beer purchased from brewers to private retailers. In addition, in or about 2011, IIIPL allegedly began working with a third party intermediary (and his company) with reputation for "taking care of" government officials and connections to the son-in-law of the Andhra Pradesh Excise Minister. The company allegedly did not have any experience, staff, or infrastructure. The intermediary allegedly helped IIIPL obtain further authorizations from the Indian authorities to operate additional hours per day through his personal connections.  IIIPL neither conducted due diligence nor executed written contracts prior to engaging in these relationships.

IIIPL allegedly requested reimbursements for expenses related to the alleged improper payments to Indian government officials to Crown and Crown paid or accrued them. In turn, Crown allegedly recorded these expenses as legitimate promotional costs in its books and records. Crown's books were later consolidated into AB InBev's books and records and, as a result, AB InBev's books and records allegedly did not accurately and fairly reflect the improper nature of these transactions. 

In 2010 and 2011, a Crown employee allegedly informed AB InBev that IIIPL may have been making improper payments to government officials through use of third party promoters and raised concerns for third party promoter's lack of sales experience and infrastructure. The employee allegedly suggested that AB InBev perform due diligence on one of the third party promoters. In early 2012, Crown allegedly terminated the employee and the two parties subsequently engaged in mediation regarding potential employment law claims related to the termination.  

In December 2012, Crown and the employee entered into a Confidential Agreement and General Release that resolved the employment law claims. The agreement allegedly included language impeding the employee from communicating directly with the SEC regarding possible violations of federal law and regulations. After signing the agreement, the employee ceased his previously voluntary communication with the SEC as he was afraid that such act would trigger agreement's liquidated damages provision imposing USD 250,000 penalty in case of breach. 

AB InBev allegedly had used similar language in other separation agreements in the past. In early 2015, AB InBev amended the agreement language to make clear that AB InBev do not prohibit the employees from reporting possible violations of law to governmental agencies.

AB InBev allegedly did make internal controls improvements at Crown and IIIPL following its 2010 internal audit triggered by internal complaints. These efforts allegedly include adoption of AB InBev’s own policies, due diligence questionnaires, and checklists; more sound controls over expenses and cash; and tighter controls over IIIPL’s accounting software, and the eventual replacement in 2012 of a flawed accounting system with a more sophisticated system. However, IIIPL employees allegedly were still able to evade the improved internal controls between 2010 and 2012.

In September 2013, AB InBev notified the SEC of a meeting in which IIIPL managers instructed top IIIPL employees to  remove potentially inculpatory data from their offices and computers Although Crown and IIIPL's in-house counsel attended the meeting, Ab InBev's management was never alerted of the situation. Although the SEC allegedly had previously informed AB InBev of IIIPL's plan to destroy or hide the documents in May 2013, AB InBev allegedly took no corrective action. 

AB InBev allegedly did not voluntarily report the internal complaints to the SEC. Furthermore, once contacted by the SEC, AB InBev did not respond to subpoenas in a timely manner, and made broad assertions of privilege that required significant resources from the SEC to address and delayed the production of responsive, non-privileged documents.

In early 2015, AB InBev and RJ Corp terminated their joint venture and dissolved IIIPL. Ab InBev now operates in India solely through Crown.

Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: obtain beer orders and to increase brewery hours

Enforcement Results

Agencies: Internal Investigation

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

In its Form 20-F filed with the SEC on 25 March 2013, AB InBev disclosed that it is also investigating the matter.

Agencies: United States: Department of Justice

Results: No Action

Year Resolved: 2016

Compliance Monitor: N/A

Ongoing: No

Details:

AB InBev announced in a press release dated 31 July 2013 that the company has been informed by the U.S. Department of Justice ("DOJ") that it is conducting an investigation of the Company's affiliates in India. The Company noted its cooperation with the DOJ.

On 8 June 2016, the DOJ notified AB InBev that it was closing its investigation and would not be pursuing enforcement action in this matter.

Agencies: United States: Securities and Exchange Commission

Results: Cease-and-Desist Order, Civil Penalty, Disgorgement

Year Resolved: 2016

Compliance Monitor: N/A

Ongoing: No

Details:

In its Form 20-F filed with the SEC on 25 March 2013, AB InBev announced that the SEC has initiated an investigation of the Company's affiliates in India. The Company noted its cooperation with the SEC.

On 28 September 2016, AB InBev, without admitting or denying the SEC's findings, entered into cease-and-desist order to settle the charges that AB InBev violated the internal controls and books and records provisions of the U.S. Foreign Corrupt Practices Act ("FCPA"), related to its operations in India between 2009 and 2012, and SEC Rule 21F-17(a) by impeding an employee from communicating directly with the SEC.

As part of the settlement, AB InBev agreed to pay disgorgement of USD 2,712,955, prejudgment interest of USD 292,381, and a civil penalty of USD 3,002,955 to the SEC. Furthermore, for a two-year period, AB InBev agreed to cooperate fully with any FCPA investigation by the SEC and DOJ, report the company's FCPA and anti-corruption compliance efforts, and make reasonable efforts to contact its former employee, as previously identified by the SEC, and provide him with a copy of the order and a statement that AB InBev does not prohibit him from contacting the SEC regarding possible violations of federal law or regulation.

ENTITIES / INDIVIDUALS INVOLVED
  • Anheuser-Busch InBev SA/NV ("AB InBev")
  • InBev Indian International Private Ltd ("IIIPL")
  • Crown Beers India Private Limited (“Crown”)
  • RJ Corp