Beam India paid Rs 10 Cr bribe to CSD: US probe

The US report says the company conducted irregular operations in Tamil Nadu, Andaman & Nicobar, Odisha and Karnataka

by Manu Pubby

Beam Global Spirits & Wine (India), referred to as Beam India by US Securities and Exchange Commission (USSEC) in its report, paid over Rs 10 crore bribe to officials of the military’s Canteen Stores Department (CSD) to promote its popular whisky brands. USSEC has fined the company almost Rs 55 crore for its irregular India operations.

The company, which makes popular liquor brands such as Teachers and Jim Beam, has been charged with making improper payments to various Indian officials through its local promoters between 2006 and 2012 to promote its products in six markets, including the national capital.

These illicit payments were disguised in books as legitimate expenses like ‘customer support’, ‘off trade promotions’ and ‘commissions’, a detailed indictment by the US commission reveals. Though it has not named any Indian official who received money over the years, the US report mentions the CSD as a major recipient.

“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,” the USSEC report says.

The CSD, set up in 1948 to provide armed forces personnel with subsidised products, has an annual budget of over `17,500 crore and services both serving and retired personnel and their families. Alcohol is available at subsidised rates, with several reported cases of diversion to the civil market in the past. The department has also been riddled with corruption allegations and investigations.

The US report says the company conducted irregular operations in Tamil Nadu, Andaman & Nicobar, Odisha and Karnataka. “The illicit payments, made with the knowledge, authorisation, and complicity of Beam India’s management, were funded through the submission of inflated invoices from the promoters, often for inflated per-case commissions,” it reads.

Citing other specific incidents, the US investigation details a Rs 12.34 lakh bribe made to an Indian excise official for the registration of a new product that company wanted to launch in India in 2011. “Within weeks after communicating this down to the third-party bottler, the label registration was approved by the excise official and Beam India’s bottler began canning and Beam India began distributing the new product,” the report says.

It also reveals a 2012 review by the company that concluded that cash from its distributors had been used to make payments worth `17 lakh to government officials in “connection with the label registration process in one sales zone in India”.

It is unclear whether Beam India made disclosures about the alleged bribery to the Indian government, but the USSEC report says it voluntarily disclosed the misconduct and its remedial actions included ceasing business operations at Beam India until it was satisfied about compliance, terminating certain employees and ending contracts with sales promoters.