BY DINESH
NARAYANAN, ET BUREAU | UPDATED: APR 21, 2017, 09.20 AM
IST
NEW DELHI: It has been a long-running battle for snack maker
Mondelez International, Inc. The company, maker of button-shaped Gems
candy-chocolate and Dairy Milk chocolate bars, has been trying to convince the
US and Indian regulators for seven years that allegations of it having set up a
phantom factory in Himachal Pradesh and paid bribes to regularise it were just
that — mere allegations.
ET now learns that the investigations both in
India and the US are nearing an end. A team from the US Department of Justice
(DOJ) may visit India in the next few days to interview former and current
employees of Mondelez India, formerly Cadbury India, according to a source at
the Central Bureau of Investigation (CBI) which is assisting the US regulator.
In January this year, US markets regulator the Securities and
Exchange Commission (SEC) had charged Mondelez with poor internal controls and
violation of the Foreign Corrupt Practices Act (FCPA) in India. Mondelez agreed
to pay $13 million (approximately Rs 90 crore) in civil penalties without
admitting or denying charges that its subsidiary Cadbury India (now Mondelez
India Foods) paid a consultant who was suspected to have bribed government
officials and possibly top state politicians to obtain licenses and approvals
for a chocolate factory in Baddi, Himachal Pradesh.
Apart from an anti-corruption unit of the CBI
assisting DOJ, the Indian agency's local unit in Himachal Pradesh and India's
Central Vigilance Commission are also conducting separate investigations under
the Indian Prevention of Corruption Act of 1988. An investigation by the excise
department had found the company and several of its officials guilty and
imposed heavy fines on all of them.The company is contesting the excise order
at the Customs, Excise and Service Tax Appellate Tribunal.
The case may also pit two of the most celebrated FCPA
personalities against each other — Daniel Kahn who joined the DOJ in 2010 and
Mark Mendelsohn who left the department in the same year for private practice.
Kahn is known as one of the most successful FCPA enforcers while Mendelsohn is
considered the architect of the DOJ's FCPA enforcement programme. The DOJ's
investigation, headed by Kahn, chief of FCPA unit, began in 2010 when a whistle
blower who worked at Mondelez (then Cadbury) alerted the department as well as
the SEC. Kahn, a rookie at the DOJ then, was the person the whistle blower
first engaged with, the whistle blower told ET.
A blog called The FCPA Blog which documents
enforcement actions under the eponymous law says Kahn was the lead prosecutor
in 10 major cases, including Alstom. It said the engineering company paid $772
million in criminal penalties — the biggest criminal fine ever levied for FCPA
offences and the second-biggest FCPA.
enforcement action overall
In an emailed response to ET's queries, Kahn said he was not
authorised to comment but a spokesperson for the DOJ would get back. Peter Carr
in the office of public affairs, DOJ, wrote to ET: "As a matter of policy,
the department generally neither confirms nor denies whether a matter is under
investigation."
A source at India's CBI told ET on condition of
anonymity that "all investigations are likely to conclude by month end''.
Last month, the CBI had sent out letters to former and current employees named
by DOJ to be present at the agency's headquarters in Delhi on April 17.
However, last week they were informed that they need not come as the hearing may
be held on a later date.
Those letters set off a flurry of activity
within Mondelez in the US as well as India. Mondelez has hired Mendelsohn, FCPA
specialist and partner at the law firm Paul, Weiss to handle the case.
"DOJ stud Mark Mendelsohn headed to Paul Weiss'' is how the Wall Street
Journal headlined his move in 2010 and described FCPA litigation as "a
sizzling hot practice area".
His profile on the web site of Paul, Weiss says
he is "internationally acknowledged and respected as the architect and key
enforcement official of DOJ's modern Foreign Corrupt Practices Act (FCPA)
enforcement program". Mendelsohn did not respond to ET's message left with
his secretary.
Mondelez was surprised by the CBI letter and
Mendelsohn personally spoke with those who had received it, according to two
people with direct knowledge of the matter.
A Mondelez spokesperson admitted to ET that it was aware that
some of the former and current employees had received intimations from the CBI.
In a written reply to ET's queries regarding the DOJ starting criminal
proceedings against the company, the spokesperson said: "We continue to cooperate
with all authorities to address this matter, which relates back to 2010-11,
through the administrative and judicial process. This includes providing our
executives with appropriate legal support during the process. We firmly
believe that the decision to claim excise tax benefit is valid and that our
executives acted in good faith and within the law in the decision to claim
excise benefit in respect of our plant in Baddi. We are not aware of any
criminal proceedings having been initiated by any authority against our company
or ex-employees."
The CBI source said DOJ officials may visit
India soon and the employees would be called then for interviews. The agency
had sent a report to the DOJ last year after the US regulator sent a letter
rogatory in January 2016. A letter rogatory is a formal communication from one
country requesting another for help in investigations in the latter's
jurisdiction.
The US request and the ensuing CBI action had
come close at the heels of an ET story on December 8, 2015 which used evidence
from Mondelez's own investigations, internal emails and documents etc to piece
together how it may have bribed government officials and possibly top
politicians. It showed how Mondelez's top management in the US knew about the
irregularities at least three months before the SEC-DOJ began their probe.
Mondelez had ordered an internal forensic investigation after
allegations surfaced regarding the bribe payments. According to one internal
communication between company officials, the investigation unearthed evidence
that "the allegations regarding improper payments to government officials
appear to be wellfounded"
Read more at:
http://economictimes.indiatimes.com/articleshow/58287616.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
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