Major Alcohol Distributor Southern Glazer’s Agrees to Pay DOJ $12.5 Million to Resolve Bribery Probe

In this photo illustration, a smartphone with the logo of US company Southern Glazer’s Wine and Spirits LLC is seen on screen in front of business website. (Photo by Timon Schneider / SOPA Images/Sipa USA)

Southern Glazer’s Wine & Spirits has agreed to pay $12.5 million to resolve a federal investigation into improper payments to alcohol retailer employees and the use of false invoices to conceal those payments, the U.S. Department of Justice announced Thursday.

The nationwide alcohol distributor entered into a non-prosecution agreement with federal prosecutors. The Alcohol and Tobacco Tax and Trade Bureau also agreed to take no action against the company for the conduct covered by the investigation.

The investigation centered on conduct involving Southern Glazer’s employees and executives who provided improper payments and other benefits to employees of alcohol retailers, including chain grocery stores, in California and elsewhere. The payments were connected to the promotion, purchase, placement and maintenance of certain alcohol products distributed by Southern Glazer’s.

According to the DOJ, the scheme involved cash, prepaid gift cards, flights, golf trips, resort stays and luxury goods. Third-party vendors were used to generate false invoices intended to conceal the payments, while several Southern Glazer’s executives based in California, including vice presidents, were directly involved in the conduct and the falsification of documents.

Southern Glazer’s said in a statement that the investigation primarily concerned activities that occurred several years ago. The company said it cooperated fully with authorities and accepted responsibility for the conduct and compliance lapses acknowledged in the non-prosecution agreement.

The agreement requires Southern Glazer’s to implement additional measures to strengthen compliance with federal and state laws governing bribery and other improper payments. The company also agreed to continue cooperating with the government in related criminal prosecutions involving current or former employees.

The resolution follows criminal charges brought in March against five former employees of an alcohol distribution company in California over an alleged scheme to bribe grocery store alcohol buyers and conceal the payments with false and forged financial records. A Napa winery salesman was also charged in connection with the investigation.

Southern Glazer’s said its compliance investments in recent years have included reorganizing and expanding its compliance staff, implementing new procedures and policies, and increasing monitoring, auditing and internal enforcement. The company said its compliance program has also been aligned with factors outlined in DOJ guidance for evaluating corporate compliance programs.

“We have always had an industry-leading compliance program, and we have redoubled our efforts to make our compliance program an example for any Company, within our industry or otherwise,” Southern Glazer’s President and CEO Wayne E. Chaplin said.

The company said the conduct involved former employees who circumvented compliance controls and policies, including through fraudulent documentation submitted by third parties.

“This conduct does not reflect Southern Glazer’s values, culture, or standards and it will not be tolerated,” Chaplin said. “Our success has always been built on winning the right way.”

U.S. Attorney Craig Missakian said the conduct affected competition in California’s alcohol market.

“Southern Glazer’s employees tried to distort the wine and spirits market in California through bribes and other improper conduct and in the end it was the consumer that lost out,” Missakian said.

TTB Assistant Administrator for Field Operations Anthony P. Gledhill said the case also highlights the responsibility of alcohol industry members for actions carried out through third-party affiliates.

Southern Glazer’s said the $12.5 million payment is part of the non-prosecution agreement, which also includes other obligations over the next two years.