IFF investigating 'improper payments' made by Israeli subsidiary Frutarom

The IFF revealed the investigation late Monday as it reported financial results for the second quarter. The inquiry is being carried out with assistance from outside legal and accounting firms.

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August 6, 2019 15:12
1 minute read.
IFF headquarters in New York

IFF headquarters in New York. (photo credit: Wikimedia Commons)

American corporation International Flavors & Fragrances (IFF) is investigating “improper payments” made by Israeli ingredient and flavor subsidiary Frutarom, which the company acquired in a $7.1 billion deal in May 2018.

During the integration of Frutarom, the IFF said, the New York-headquartered company was made aware of allegations that “two Frutarom businesses operating principally in Russia and Ukraine made improper payments to representatives of a number of customers.”

The IFF revealed the investigation late Monday as it reported financial results for the second quarter. The inquiry is being carried out with assistance from outside legal and accounting firms.

“IFF’s investigations are not yet complete, but preliminary results indicate that improper payments were made and that key members of Frutarom’s senior management at the time were aware of such payments.”

Based on the investigation to date, IFF stated that it had not uncovered evidence suggesting that the payments had any connection to the United States and also stated its belief that improper customer payments were no longer being made.

“The estimated affected sales represented less than 1% of IFF’s and Frutarom’s combined net sales for 2018,” the company said. “IFF does not believe the impact from these matters is or will be material to IFF’s results of operations or financial condition.”

Based in Haifa, Frutarom develops and manufactures flavors and ingredients for the food, flavor, fragrance, pharmaceutical and cosmetic industries.

The company employs approximately 2,700 people worldwide and sells over 70,000 products in some 150 countries, supplying leading global companies that include Nestle, Coca-Cola and Israeli food manufacturer Osem.

The acquisition of the company for $7.1b. still represents the second largest sale or “exit” of an Israeli company to date, only surpassed by Intel’s purchase of Mobileye for $15.3b. in 2017.

Emphasizing the company’s commitment to the “highest standards of ethics and compliance,” IFF said it has taken or will take appropriate remedial actions with respect to improper payments made by Frutarom.

“Although the investigations are continuing, based on the results to date and other compliance-related integration activities IFF is not currently aware of similar instances of misconduct,” the company said.


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