Monday, November 16, 2015

Department Of Justice Investigating Whether Diageo USVI Breached Contract

     A story has broken in St. Croix that there is an issue with Diageo and what is transpiring at the plant in St. Croix.  This is an article published by the VI Consortium on November 10, 2015.   This is a portion of the article and the rest can be read at   I will publish the Diageo response tomorrow. 

     Between the hours of 9:00 a.m. and 10:00 a.m. on Monday, Department of Licensing and Consumer Affairs, along with Department of Justice 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's supposed to be molasses used to produce rum at Diageo USVI's Captain Morgan Rum Distillery, a DOJ source with direct knowledge of the matter revealed to The Consortium, after the publication questioned officials on a tip it received from another source with inside knowledge of the probe.

     DOJ and DLCA officials also took samples from two separate shipments at Diageo's rum distillery, located at the Renaissance Park development here. According to the DOJ source, who requested anonymity because of the nascent nature of the investigation, part of Diageo USVI's agreement with the Government of the Virgin Islands is that the GVI subsidizes the molasses imported to make the rum here. But the samples collected on all 14 containers did not appear to be molasses, which is dark in color and has a strong, distinct smell.


"It looks and smells like rum," the DOJ source said, adding that DOJ must first test the samples before accusing Diageo USVI of any wrongdoing or breach of contract. But if the firm were to be found in breach, the consequences could be far-reaching; and the DOJ would extend its investigation and try to determine how long the breach has existed.
molasses pier entrance

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.