The Securities Exchange Commission (SEC) of US has accepted the offers of settlement from chocolate giant Cadbury and Modelez International Ltd which acquired Cadbury.
SEC had charged Cadbury Limited and Mondelez International, Inc. with violating the internal controls and books-and-records provisions of the Foreign Corrupt Practices Act (FCPA).Accordingly in anticipation of the institution of these proceedings Cadbury Limited (Cadbury) and Mondelez have agreed on January 6th 2017 to pay $13 million to settle charges. According to the SEC Order, the FCPA violations arose from payments their subsidiary in India made to a consultant to obtain government licenses and approvals for a chocolate factory in Baddi, India.
An SEC investigation found that in February 2010, Mondelez, formerly known as Kraft Foods, Inc., acquired Cadbury and its subsidiaries, including Cadbury India Limited, which manufactures and sells chocolate products in India.
In 2010, Cadbury India retained and made payments to an agent to interact with Indian government officials to obtain licenses and approvals for a chocolate factory in Baddi, India.
Cadbury India failed to conduct appropriate due diligence on, and monitor the activities of, the agent. From February 2010 to July 2010, the agent submitted five invoices to Cadbury India for, among other things, preparing license applications. Cadbury India employees at Baddi, not the agent, prepared these license applications. Cadbury India paid the agent a total of $90,666 (after withholding tax) upon receipt of the invoices. After receiving each payment, the agent withdrew from its bank account most of the funds in cash. During this time period, Cadbury India obtained some of the licenses and approvals.
Cadbury India’s books and records, which were consolidated into the books and records of Cadbury and Mondelez, did not accurately and fairly reflect the nature of the services rendered by the agent.
Cadbury did not implement adequate FCPA compliance controls at its Cadbury India subsidiary, which created the risk that funds paid the agent could be used for improper or unauthorized purposes.