India investigating Philip Morris, Godfrey Phillips


By Aditya Kalra

NEW DELHI, March 8 () - India's main financial crime-fighting agency is investigating Philip Morris International Inc and its Indian partner Godfrey Phillips for alleged violation of the country's laws, a senior directorate source told on Friday.

The Enforcement Directorate has been looking into both the companies and the scope of the investigation is much broader than the alleged foreign investment law violations highlighted in a story published on Wednesday, the source said.

Three former officials and one former head of the Enforcement Directorate had reviewed the Philip Morris documents for and said the dealings should be investigated for circumventing India's foreign direct investment rules.

On Friday, the Enforcement Directorate source declined to comment on whether the ongoing investigation included reporting findings, but said "this is already under investigation."

"Both companies are being looked into," said the source, who declined to be named citing sensitivity of the investigation.

The source declined to share further details of the probe.

A spokesman for the Enforcement Directorate did not respond to an e-mail seeking comment. Philip Morris and Godfrey did not immediately respond to requests for comment.

Philip Morris has previously told its business arrangements with Godfrey comply with India's foreign direct investment rules. Godfrey has said all the commercial arrangements "are in complete compliance with the extant regulations governing" India's foreign direct investment and other laws.

Shares in Godfrey briefly pared gains on Friday following the report about the investigation. They closed 2 percent higher.


India in 2010 prohibited foreign direct investment in cigarette manufacturing, saying this would enhance efforts to curb smoking.

Ahead of the ban, Philip Morris formed a new wholesale trading company with Godfrey. Since then, Godfrey has acted as a contract manufacturer of Marlboro cigarettes in India, while Philip Morris's local unit acts as a wholesale trading company and promotes the brand.

Dozens of internal company documents showed Philip Morris has been indirectly paying costs related to Marlboro cigarette manufacturing in India in a phased manner.

If the Enforcement Directorate finds a company in violation of the rules, Indian law allows it to impose a penalty of up to three times the amount contravened.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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