Did Cadbury use a phantom factory to dodge taxes?

India says the Mondelēz subsidiary lied to get a tax exemption, thereby avoiding $46 million in taxes.

By Jason Notte Mar 6, 2013 3:38PM
Chocolate moves down the production line at the Cadbury factory in Birmingham, England (© Simon Dawson/AP Photo)How did Cadbury make a killing in India without handing over a huge portion to the tax man? Maybe by declaring a factory in India that was as real as the Easter Bunny.


India is accusing Cadbury of dodging $46 million in taxes by tweaking documents to get a tax exemption offered to companies that built new factories in the northern Indian state of Himachal Pradesh by March 31, 2010, according to The Wall Street Journal. Unfortunately for Cadbury, investigators say there's no way the factory could have existed by then because it didn't have the proper government approvals.


Instead, the investigation found that Cadbury manipulated information about expansion at an existing plant to make it sound as if the company built an entirely new factory before the deadline.


To top it off, the U.S. Securities and Exchange Commission is also investigating the phantom plant to see if Cadbury bribed Indian officials to stay quiet about its nonexistence. That would violate the Foreign Corrupt Practices Act, which forbids U.S.-listed companies from bribing foreign officials.


Cadbury's parent company, Mondelēz International (MDLZ), vowed to cooperate fully with the investigation, but Mondelēz itself didn't exist when all of this allegedly went down. Just before the tax exemption deadline in 2010, U.S.-based Kraft Foods (KRFT) bought Cadbury and its brands like Crème Eggs, Dairy Milk and Dentyne. Kraft wanted these brands to help open up emerging markets like India, where Cadbury racked up $400 million in sales the year before the buyout. Kraft Foods then spun off its North American grocery business and became Mondelēz last October.


Mondelēz says sales in India have grown 20% to 30% a year since then, which puts Cadbury's sales in India at $700 million to $800 million. Because Cadbury didn't get its license for a factory in Northern India until May 29, 2010, and didn't get the OK to start production at a new plant until Jan. 14, 2011, according to the report, Cadbury has sold about $591 million in goods from that time through this January without paying taxes on those sales.


It's not that Cadbury doesn't have a factory in Northern India, mind you. It's just that its plant in Baddi, which produces Dairy Milk chocolates and cocoa drink Bournvita, originally opened in 2005 and added only a second floor in 2009.


That addition was presented to the Indian government as an entirely new factory, which is a much bigger fib than telling children that a rabbit with a chicken's voice lays foil-wrapped chocolate eggs each Easter.


More on moneyNOW

31Comments
Mar 6, 2013 5:28PM
avatar
big surprise-big company cheated on their taxes
Mar 6, 2013 6:07PM
avatar

I'm conservative and this $hit has to stop.  These companies like Google, Facebook, Apple, GE, etc... paying no taxes and getting millions or billions in REFUNDS is crazy.  I'm all for creating an environment conducive to business, but between the left wanting to spend us into oblivion and the right wanting to give away the tax farm, who's looking out for the average guy.  People who are tied to their party in some blind faith are dreaming.  Wake up people and start to question everything!  I feel like I'm living in a bad version of the Matrix or something.  My country is disappointing me and my countrymen/women are buying the excuses their party gives them, thus blaming the other party.  Strip away a few emotional issues and 99% of us all want the same thing.  Party politics keeps people at eachother's throats, and distracted from issues of importance.

 

The left claims to want these tax loopholes closed, but I would like to be a fly on the wall IF the repubs caved and gave in all of a sudden.  I bet you could hear a pin drop until the back sliding began.  They are all in bed together with business, one party just denies is more than the other.  They all deserve an exit pass for the bs they've pulled on us.

Mar 6, 2013 5:12PM
avatar

next your gonna

 tell me there's no santa claus!

Mar 6, 2013 5:26PM
avatar
Knowing the SEC, they'll settle for two solid chocolate eggs.
Mar 6, 2013 5:35PM
avatar
A corporation lied for the purpose of evading taxes? Nothing new here.
Mar 6, 2013 5:26PM
avatar
survey says... yes. wouldn't surprise me given in the very recent past surveyed mba's have less moral fiber than ex-convicts.
Mar 6, 2013 5:58PM
avatar
I bet Kraft didn't pay any taxes in the USA either.
Mar 6, 2013 5:52PM
avatar
Tell me we don't need more auditors and that they wouldn't more than pay for themselves and help reduce the deficit.
Mar 6, 2013 6:06PM
avatar
This is what wealthy people do...DUH...
Mar 6, 2013 5:46PM
avatar
What do you expect from a rabbit that sounds like a chicken?
Mar 6, 2013 6:29PM
avatar
Sounds like Wal-Mart in Mexico , bribing the officials so they can build 126 store before they talk to the Mexican government to get permits.  
Mar 6, 2013 6:40PM
avatar
The founder of Candbury was an amazing compasionate person. These guys should be totaly ashamed of themselves.
Mar 6, 2013 6:51PM
Mar 6, 2013 6:09PM
avatar
freedom isn't free. they r taking money from our soldiers our teachers, police, fire etc...how could u live with yourself knowing that.
Mar 6, 2013 5:45PM
avatar
Please Cadbury.....Say it ain't so!...... Say you wouldn't lie just to get more money!
Mar 6, 2013 6:16PM
avatar
Add some salmonella to the mix and Cadbury is going to have a serious case of the sh*ts.
Mar 7, 2013 12:44PM
avatar
This story says a lot more about the Indian government than Cadbury. Their government must be run by the same children who believe the rabbit/chicken Easter egg story ! How do you fool a government into thinking a factory addition is a new factory ? By bribing local government officials that's how ! We all moan about the corruption in Washington, but it all starts at the local level and gets worse as these locals rise in the ranks of power. If we are ever going to get control of these thieves we have to start at the local level and punish anyone who betrays the public trust with mandatory prison time and forfeiture of all benefits.
Mar 6, 2013 7:08PM
avatar
     Rabbits having sex with Chickens, isn't anything sacred anymore?.
Mar 6, 2013 6:59PM
avatar
American Capitalism.......don'tcha love it?!
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The commodity complex was under pressure today as a stronger dollar index weighed on prices.

Dec gold pulled back from its session high of $1226.30 per ounce set in morning action and traded as low as $1214.60 per ounce, its lowest since January 2014. Unable to gain momentum, it settled 0.8% lower at $1216.50 per ounce, booking a loss of 1.2% for the week.

Dec silver fell to four year lows after trading as high as $18.49 per ounce in early morning floor trade. It ... More

MSN MONEY'S