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Oops! WilmerHale email to reporter reveals apparent SEC probe into PepsiCo GC's departure

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Updated: A misaddressed email from WilmerHale informed a Wall Street Journal reporter that the Securities and Exchange Commission was investigating the departure of PepsiCo’s general counsel.





The email said the SEC appeared to be focusing on allegations that PepsiCo retaliated against Maura Smith because of her investigation into the business practices of a Russian company acquired by the soft-drink maker, the Wall Street Journal (sub. req.) reports.

Anonymous sources confirmed the information to the newspaper, but said the probe was at an early stage and might not result in any enforcement action.

In a statement released Wednesday, PepsiCo said it was cooperating in the investigation and did not engage in any retaliatory conduct. Smith’s departure in June 2012, after about a year at the company, was not related to “any dispute or disagreement” over her investigation of the Russian company, PepsiCo said.

The WilmerHale email was sent to lawyers working on the SEC matter as well as the reporter. WilmerHale said it was disappointed the reporter used material from the email, and the law firm is taking steps “to ensure that emails are not misaddressed to unintended recipients.”

PepsiCo first learned of potential wrongdoing at the Russian company, Wimm-Bill-Dann, through a call to a tip line. PepsiCo hired Gibson Dunn to investigate, and it found possible violations of accounting provisions of the Foreign Corrupt Practices Act, according to documents included with the email. PepsiCo reacted by firing employees associated with the alleged wrongdoing and strengthening financial controls.

Smith prepared a memo with major findings for the PepsiCo board, which was included in the materials mistakenly sent to the Journal. It alleged insufficient due diligence by PepsiCo executives in Europe and a need for a better system to bring problems to headquarters.

The memo was never sent to the board, sources told the Wall Street Journal. Smith received nearly $6 million in a separation agreement.

Updated at 1:28 p.m. with statement from PepsiCo.