By Dave Sebastian
Diageo PLC has agreed to pay $5 million to settle charges brought by the Securities and Exchange Commission that it hit performance goals by pressuring distributors to buy products in excess of demand.
The pressure on distributors by the company's employees at Diageo North America, its largest subsidiary, contributed to an uptick in shipments that allowed it to meet performance targets and post higher growth in closely watched indicators amid declining market conditions, the SEC alleges. The London-based alcoholic-beverage company didn't disclose the risk of the inventory increase on future growth, the SEC said.
In addition to the settlement, Diageo agreed to cease and desist from further violations without admitting or denying the SEC's findings.
"Diageo is pleased to have resolved this legacy matter, which relates back to fiscal years 2014 and 2015," the company said. "Diageo regularly reviews and refines its policies and procedures and is committed to maintaining a robust and transparent disclosure process."
The SEC also said the metric-boosting method created a misleading impression that the company was able to achieve growth through regular demand.
"Investors rely on public companies to make complete and accurate disclosures upon which they can base their investment decisions," Melissa Hodgman, an associate director in the SEC's Division of Enforcement, said in prepared remarks.
American depositary shares of Diageo rose about 0.7% to $162.94.
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