Diageo fights Colombian money laundering allegations

The drinks giants Diageo and Pernod Ricard are being sued in the United States by the Colombian government over allegations of money laundering and selling contraband products to criminals.

The drinks giants Diageo and Pernod Ricard are being sued in the United States by the Colombian government over allegations of money laundering and selling contraband products to criminals.

The companies are accused of "competing unfairly" with Colombian government-owned drinks companies by selling their products to criminals and receiving payments from companies who use laundered funds. As of last night, the Republic of Colombia had filed the complaints in the court of the Eastern District of New York, but the companies said they had not yet been served with the suit.

The claims come under the US's racketeering laws, which are used to fight organised crime and are currently in action against the tobacco industry. Diageo said: "The lawsuit alleges that these companies have violated the Federal Rico Act by facilitating money laundering in Colombia through their supposed involvement in the contraband trade to the detriment of government-owned spirits production and distribution businesses."

Both companies vigorously deny the allegations. Diageo said it had alerted shareholders to the possibility of legal action from Colombian authorities for some years. Officials in the Colombian government have been considering legal proceedings against large spirits companies for unpaid excise duties and taxes on products smuggled into the country by third parties since August 2000.

But Diageo, which makes Smirnoff and Guinness, said it had worked with government officials in Colombia to help eliminate the illegal liquor trade. "Diageo is very proud to responsibly market and sell its brands in Colombia and Diageo adheres to the laws and regulations in the countries where our brands are sold," it said.

Also named in the lawsuit is Seagram. Pernod and Diageo teamed up in 2001 to buy Seagram's brands. They subsequently broke up the company, with Diageo taking its Captain Morgan rum brands, and Pernod taking Seagram's gin.

Although Diageo said yesterday its Colombian operations were small, accounting for only 3 per cent of its Latin American sales, its annual report identifies Colombia as one of its key markets. Pernod Ricard also said the Colombian market was not very significant for the group, representing 0.5 per cent of sales.