Southern Glazer’s fined $3.5m over ‘pay to play’ scheme
Miami-based wholesaler Southern Glazer’s Wine and Spirits (SGWS) has been fined a record US$3.5 million by New York’s State Liquor Authority (SLA) for engaging in “pay to play” schemes to win business, with the violations uncovered described as “truly staggering” by one official.
Imposing a fine of $3.5m – the largest penalty ever imposed by the SLA – the agency said it had found the wholesaler guilty of providing “illegal gifts and services to business to influence their purchasing decisions, for permitting incomplete, inaccurate, and inadequate record keeping practices, and for engaging in discriminatory sales.”

Specifically, investigators found that representatives of SGWS would routinely provide illegal gifts, either in the form of cash or goods, at favoured restaurants and retail establishments, running up large expenses on their corporate credit cards – an illegal practice commonly known as “credit card swipes.”

The company was also found in breach of New York State’s Alcoholic Beverage Control (ABC) law for giving certain retailers preferential discounts on stock over others.

“The multitude of violations found during the course of these investigations is truly staggering,” said State Liquor Authority chairman Vincent G. Bradley.

“The SLA remains committed to rooting out abuse and corruption in the alcoholic beverage control industry to ensure a level playing field for all businesses. I am incredibly proud of the work of our enforcement and legal teams, who work hard every day to protect small businesses and consumers.”

In addition to the $3.5m fine, SGWS has also agreed to enter into a Corporate Compliance Agreement, the first of its kind, which will allow the SLA to obtain information on systemic and systematic practice violations moving forward. It will also impose additional obligations and responsibilities on SGWS to report suspicious activity directly to the SLA for investigation and possible prosecution.

“By working together to identify suspicious activity early, SGWS and SLA are creating a new scalable and replicable compliance model for the industry,” the SLA said. “The Corporate Compliance Agreement includes a Code of Business Conduct and Ethics, a Corporate Compliance Program and Policy, and provides for a Corporate Compliance Officer, as jointly appointed by the SLA and SGWS, to monitor and address suspicious activity both to SLA and SGWS.”

In return, the SLA has agreed to suspend $1m of the penalty against SGWS to ensure the company adheres to its Corporate Compliance Agreement, and in recognition of its cooperation during the course of its investigations.

“We will never tolerate systemic and systematic violations of the laws of our great state,” added counsel to the SLA Christopher R. Riano. “This nationally historic settlement is a testament to New York’s strong and enduring leadership in the alcoholic beverage control industry. I look forward to working together with Southern to continue to root out deceit, deception, and exploitation of the system, and I am excited to pilot our new Corporate Compliance Agreement program moving forward.”

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