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The former president of Domecq Importers pleaded guilty last week to being one of a group of executives who embezzled $15 million using phony bills and kickbacks.

The guilty plea by Gabriel Sagaz is part of a broad U.S. Justice Department probe into kickbacks and bid rigging in the point-of-purchase, merchandising and promotion industries.

Mr. Sagaz, a former brand manager for Sauza tequila and VP-marketing for the liquor importer, became president in September 1995 and departed the company a year later.

The Justice Department has already filed complaints in 17 cases, charging individuals and companies either with conspiring illegally to fix the prices that tobacco and liquor marketers pay for signage, T-shirts and other merchandising items or with offering kickbacks.


According to criminal information filed in U.S. District Court, New York, in connection with Mr. Sagaz's plea agreement and obtained by Advertising Age, shortly after Mr. Sagaz became a brand manager for Sauza tequila in 1989, he was called in to meet with two top executives.

"The defendant . . . met with two senior executives of Domecq Importers -- [its] president and chief executive officer and its chief financial officer," according to the document. "These executives revealed that they had been diverting money out of Domecq Importers to create a fund to provide them with additional income and they had been assisted in the scheme by one or more of Domecq Importers' vendors. These executives invited [Mr.] Sagaz to help them divert money . . . [Mr.] Sagaz agreed."

The executives are not named.

A spokesman for parent Allied Domecq Spirits & Wine USA declined comment on the investigation, noting the probe is continuing; he also declined to say whether ad agencies were involved.

The document also states that "The embezzlement scheme continued . . . until about August 1996. During this period another executive, Domecq Importers' vice president for sales, was invited to participate in the scheme [and] . . . did join."

No other executives have been charged with any wrongdoing.

The government filing does not mention any actual suppliers or vendors by name, but does outline three ways money was obtained. One involved invoices for goods and services sent by phony companies. Another relied on bottlers to either pay a "fee" to a company controlled by the group or to be given promotional allowances to be used for kickbacks. Finally, actual vendors are alleged to have inflated their bills and -- in return for being allowed to keep some of the extra cash -- paid a kickback.

The conspiracy became more complicated in 1994, when the importer was purchased by U.K.-based Allied-Lyons, which attempted to impose a requirement for competitive bidding.


Mr. Sagaz, who is now cooperating in a continuing Justice Department probe, faces a maximum sentence of five years in jail, three years of supervised release and a fine of up to twice the company's loss.

John Orr, director of criminal enforcement for antitrust, said the Justice Department investigation of the POP industry is continuing, looking into the price of "a wide range of promotion and advertising materials."

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