Diageo pays $5m fine over ‘misleading’ sales

The Securities and Exchange Commission (SEC) has fined Diageo US$5 million after its North American arm created a “misleading picture” of its financial results.

Diageo’s portfolio includes Johnnie Walker blended Scotch whisky

According to the US securities regulator’s charges, in its 2014 and 2015 fiscal years, Diageo North America “pressured” distributors to buy excess inventory in order to meet internal sales targets in the face of declining market conditions.

However, Johnnie Walker owner Diageo failed to disclose the excess stocks to investors, creating a “misleading impression” that Diageo and Diageo North America were able to achieve their sales targets through normal customer demand, according to the SEC.

Melissa R Hodgman, an associate director in the SEC’s division of enforcement, said: “Investors rely on public companies to make complete and accurate disclosures upon which they can base their investment decisions.

“Diageo pressured distributors to take more products than they needed, creating a misleading picture of the company’s financial results and its ability to meet key performance indicators.”

The SEC added that the charges found Diageo failed to disclose the positive impact “over shipping” had on sales and profits, but also the negative impact this would have on future growth.

Without admitting or denying the SEC’s findings, Diageo has agreed to pay a US$5m penalty, and agreed to cease and desist from any further violations. The SEC has accepted Diageo’s offer.

A Diageo spokesperson said: “Diageo is pleased to have resolved this legacy matter, which relates back to fiscal years 2014 and 2015.

“Diageo regularly reviews and refines its policies and procedures, and is committed to maintaining a robust and transparent disclosure process.”