Exclusive: Former Mondelez employees called in for questioning over 7-year-old case

Seven years after an alleged excise evasion case came to light, there could be more trouble for the Indian unit of global food major Mondelez International. Former employees have received summons asking them to appear before the New Delhi unit of the Central Bureau of Investigation on April 17, Monday, in connection with an investigation into claiming excise benefits for a plant in Baddi, Himachal Pradesh.
 
The summons are likely in connection with a possible Department of Justice (DoJ) investigation to be initiated in the US over alleged violations of the Foreign Corrupt Practices Act that took place when the company expanded its unit in Baddi, according to a person with direct knowledge of the matter.
 
The company declined to explain why former employees have been summoned but, in a phone conversation with Forbes India, a spokesperson did acknowledge that the employees have been called in for questioning. Mondelez also declined to answer a question on whether the summons were in connection with a possible DoJ investigation.
 
In January, Mondelez had already settled with the Securities and Exchange Commission in the US through payment of a $13 million (Rs 84.5 crore) fine. Importantly, the DoJ had not closed the case along with the SEC settlement.

The case dates back to 2009-10 when the company had applied for excise and income tax rebates in lieu of chocolates produced at a new unit in the factory. The exemptions would have resulted in cumulative savings of 100 million pounds (Rs 600 crore at the then prevailing exchange rate) over a period of 10 years. (Forbes India had reported on this matter in 2012.)

The exemptions could only be claimed if the unit was completely separate from the existing unit – a fact that the company had reportedly overlooked. In its haste, Cadbury, as it was then known, had not applied for new licences under the Factories Act as well as separated workmen records for the new unit. Mondelez then tried to obtain a variety of back-dated permissions for the new unit for which it had to allegedly pay bribes.
 
These run-ins with regulatory authorities may end up costing the company much more than the Rs 600 crore they would have saved over a period of 10 years. The excise authorities had disallowed Mondelez’s excise exemption and had in March 2015 asked the company to pay excise duty amounting to Rs 342 crore as well as a penalty of Rs 231 crore. In its order,  adjudicating authority Parminder Singh Sodhi had said that this was a case of systematic excise evasion. Anand Kripalu, who was its managing director in India until 2013, was fined Rs 1 crore. A number of other employees were fined lesser amounts. Mondelez is contesting the order.
 
An email statement to Forbes India by Mondelez says: “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.”