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Diageo USVI has been importing "what appears to be some
offshoot of rum from some foreign source," Governor Kenneth Mapp confirmed
while speaking on talk radio AM 1000 with Liston Davis yesterday morning. Mr.
Mapp had begun to say that the rum was coming from Guatemala, but he
immediately rephrased his statement. The Consortium first reported on what has now turned into a
major investigation into Diageo, which sources within the Department of Justice
told the publication could have far-reaching implications, and that "all
hell could break loose."
Between the hours of 9:00 a.m. and 10:00 a.m. on Monday,
November 9, Department of Licensing and Consumer Affairs, along with DOJ
officials descended on the Gordon A. Finch Molasses Pier located on the south
shore of this island and west of Tropical Shipping, to take samples from 12
tanks of what was supposed to be molasses used to produce rum at Diageo USVI's
Captain Morgan Rum Distillery. DOJ and DLCA officials also took samples from
two separate shipments at Diageo's rum distillery, located at the Renaissance
Park development here.
Diageo's St. Croix Facility
In 2008 the GVI subsidized Diageo's move to the island,
totaling an estimated $2.7 billion over 30 years. Some of the subsidies
include: a new $165 million distillery, "market support payments" to
keep prices low for molasses, 35 percent of what Diageo spends on advertising,
a 90 percent income tax break, exemption from property taxes, environmental
mitigation supports, and 47.5 percent of all tax revenue collected on Captain
Morgan rum. By one estimate, Diageo's net cost to produce rum is zero,
according to Tax Foundation, a leading independent tax policy research
organization. The 30-year agreement received Senate ratification on July 9,
2008, with a 10-5 vote. However, the rum-cover over funds are supposed to be for rum
produced in the territory; not imported from elsewhere and reshipped out as if
the products were made here.
On the talk show yesterday, Mr. Mapp said he sees nothing in
the Diageo contract that allows it to receive subsidies on anything else but
molasses. "I don't see anything in the Diageo contract that
permits the government to subsidize the import of foreign rum as a mixing
source to rum that are to be made on the island of St. Croix for export to the
U.S. market," the governor said. "The government has agreed to
subsidize molasses." Mr. Mapp said he read Diageo's response that said that the
rum producer had spoken about a new distilling process using sugar cane
intermediate with the governor, and that Mr. Mapp had given Diageo clearance.
The governor, however, disputed those claims.
"The good thing about operating and communicating with
a government is running down the hill by my house, but
you can't do that" when dealing with the government, Mr. Mapp said.
The governor said Diageo sent a letter advising
him that it had acquired some customers who were interested in buying bulk rum.
And in its quest to meet its contractual obligations of selling 9 million proof
gallons of rum on the U.S. mainland - Diageo is roughly 2 million gallons shy
of that amount - the company sought the governor's assurance that the tax of
the bulk rum would remain equivalent to that of the bottled product, which
currently stands at $13.25 per gallon. Mr. Mapp said he agreed to that; but fixed
tax prices and bulk rum have nothing to do with subsidies being paid by the
government on a product that is not molasses.
"Diageo did not advise me, nor did it seek my
permission, to bring in any deviation of foreign rum into the Virgin Islands
and then attempt to mix it and call it some deviation of the natural rum of the
Virgin Islands, and sell it under some label," Mr. Mapp said. "And so
that issue is under investigation by the appropriate authorities and we will
get to the bottom of that."
Read More at http://viconsortium.com/?s=Diageo+Importing+Offshoot+Of+Foreign+Rum%2C+Mapp+Confirms%2C+DOJ+Investigation+Underway