Federal securities regulators are examining an accusation by PepsiCo Inc.'s previous leading lawyer that the company fired her in retaliation for the way she managed an internal probe into possible misbehavior in Russia, according to people knowledgeable about the matter and internal files.
Maura Smith, who was PepsiCo's general counsel from May 2011 to June 2012, supervise outdoors attorneys worked with by the company to go into business practices at Wimm-Bill-Dann, a huge Russian maker of dairy items and juices that PepsiCo invested about $5 billion to obtain in 2011, the files reveal.
The Securities and Exchange Commission is looking at accusations that Ms. Smith was ousted because her deal with the probe rankled others at PepsiCo, people knowledgeable about the matter stated. The query is at an early phase and is concentrated on the situations of Ms. Smith's termination, individuals stated, and might not result in any enforcement action.
" PepsiCo did not participate in any vindictive conduct and any claims to the contrary are false," the company stated in a declaration. "The company is working together with the SEC examination." PepsiCo stated Ms. Smith's departure was not associated with "any disagreement or argument" over the internal examination.
PepsiCo stated it checked out claims of misbehavior at the Russian company thought to have happened before it purchased the company. "As quickly as PepsiCo ended up being mindful of the conduct, it completely examined and remediated the concerns, none which was a product to PepsiCo's monetary declarations," PepsiCo stated.
When PepsiCo revealed Ms. Smith's departure in 2012, the company stated she was resigning to pursue other chances. Her separation contract, signed 4 months after her exit, entitled her to almost $6 million in money payments, regulative filings reveal. The arrangement avoids the company and Ms. Smith from disparaging one another.
Some people acquainted with Ms. Smith's period at PepsiCo explained it as rainy and significant by disputes with other executives. They stated that Ms. Smith's work had remained in question for months preceding her exit.
Others acquainted with Ms. Smith's time at the company stated she was a skilled general counsel who rapidly endeared herself to PepsiCo Chief Executive Indra Nooyi. Executives turned on her as the Russia examination used on, they stated. Before signing up with the Purchase, N.Y., company, Ms. Smith worked as general counsel for 8 years at International Paper Co. and for 5 years at Owens Corning.
PepsiCo has put together a group of prominent attorneys to represent the company in the SEC examination. The group consists of Mary Jo White, who stepped down as the chairman of the SEC in January and is now a partner at Debevoise & Plimpton LLP. It also consists of partners at Wilmer Cutler Pickering Hale and Dorr LLP, referred to as WilmerHale.
Ms. Smith, 61, now in personal practice, was subpoenaed this year by the SEC and met federal government attorneys as part of a company examination of whether employment agreement at significant U.S. companies dissuaded staff members from reporting misbehavior, according to a memo prepared by WilmerHale and individuals knowledgeable about the matter.
The memo, which was dated Aug. 31, and other files were wrongly sent out by a WilmerHale lawyer to a Wall Street Journal press reporter as part of communication to other lawyers dealing with the matter. The memo stated the SEC "now seems concentrated on claims by Ms. Smith that she was struck back versus in offense of the SEC's whistleblower guidelines.".
After publication of this short article, WilmerHale stated it was dissatisfied that the Journal used a product from the e-mail. "We are taking extra procedures created to make sure that e-mails are not misaddressed to unexpected receivers," the company stated in a ready declaration.
PepsiCo purchased a bulk stake in Wimm-Bill-Dann in February 2011 and took complete control in September of that year.
In August 2011, a Wimm-Bill-Dann staff member used a PepsiCo suggestion line to report an accusation that senior supervisors at the Russian company hid a $3 million deficiency in projection quarterly monetary outcomes by moving expenditures and incorrectly capitalizing about 1,700 lots of skim milk, the files reveal.
PepsiCo's local staff started examining, but the company's head office didn't learn of the matter for months, people acquainted with the matter stated. The suggestion raised issues amongst PepsiCo's auditors about whether Wimm-Bill-Dann results before the takeover had to be reiterated, internal files reveal. The auditors concluded no restatement was needed, someone knowledgeable about the matter stated.
Following the episode, PepsiCo engaged law office Gibson, Dunn & Crutcher LLP to "topple every rock" at Wimm-Bill-Dann, among individuals stated. The examination uncovered proof of theft, incorrect land offers and countless dollars in doubtful consulting agreements and gratuities, consisting of a company-owned Audi A8 sedan that was offered to a local guv of Russia to use totally free, according to internal files. These practices had begun when Wimm-Bill-Dann was an independent company, and some had continued after the PepsiCo takeover.
Gibson Dunn concluded that the automobile and the consulting agreements "most likely make up possible infractions" of accounting arrangements of the Foreign Corrupt Practices Act, a law that disallows U.S.-listed business from paying kickbacks to foreign authorities and needs companies to preserve strong internal controls. The examination found no definitive proof of more major offenses of the law's antibribery arrangements, according to the files.
PepsiCo took steps to resolve the findings, consisting of eliminating workers associated with supposed misbehavior and upgrading Wimm-Bill-Dann's monetary controls and business practices to adhere to PepsiCo's compliance program, the files reveal.
While the examination was continuous, Ms. Smith asked legal representatives at Gibson Dunn to assist her to prepare a comprehensive memo for the PepsiCo board that would provide the significant findings, according to internal files. Among those attorneys felt unpleasant with the demand, according to among the files wrongly sent out to the Journal that summed up a current discussion with her. To the lawyer, it appeared that Ms. Smith wished to "call out names of previous and existing staff members and place blame," while safeguarding her own position at the company, according to the file.
Ms. Smith had prepared a memo with the help of Gibson Dunn, and a 33-page draft dated June 7, 2012, was amongst the files wrongly sent out to the Journal. Amongst its assertions: PepsiCo executives in Europe didn't do enough due diligence after the Wimm-Bill-Dann offer, and the company's system for intensifying possible issues to head offices had malfunctioned sometimes.
After the Gibson Dunn lawyer connected around that time to Hugh Johnston, PepsiCo's primary monetary officer, about her issues, Mr. Johnston informed Ms. Smith to quit working on the memo, according to individuals acquainted with the matter and internal files. It was never ever sent out to the board, according to others acquainted with the matter, and Ms. Smith's work ended June 15, 2012.