PepsiCo accused of abetting billing fraud

Minority owners of a Cypriot bottling company have sued PepsiCo Inc. for $95 million for allegedly aiding and abetting a false invoicing scheme.

The family of Semsi Erkman, a Cypriot businessman and physician, claim that Pepsi officials knew that a pass-through invoicing company was inflating the beverage company’s invoices by as much as 50% and keeping the money for its owners.

The sole purpose of Infima, an offshore shell company, was to inflate Pepsi invoices for the benefit of the bottling company’s majority owners, according to a complaint filed on March 5 in Westchester Supreme Court.

Pepsi, based in Purchase, did not reply to an email asking for its side of the story.

Ektam Kibris Ltd., of Nicosia, Northern Cyprus, has been the exclusive bottler and distributor of Pepsi products in the Turkish state since 1981.

The Erkman family owns 25% of the business, according to the complaint. Tamek Holding AS, controlled by Melih and Gungor Sipahioglu, of Turkey, owns the rest.

Ektam pays Pepsi for concentrates, the syrup to which water and carbonation is added to make softdrinks.

Initially, Pepsi billed the bottling company through a Turkish company to quell “certain geographic sensitivities” between Turkey and Greece about Cyprus. The intermediary, co-owned by Pepsi and the Sipahioglus, passed the invoices on to Ektam with little or no mark-up, according to the complaint, and then the bottler paid Pepsi.

In 2002, the Sipahioglus sold their interest in the go-between company.

Melih Sipahioglu, who allegedly had a close business relationship with then-Pepsi CEO Indra Nooyi, told Ektam bottling company officials that Pepsi wanted to use Infima Holding N.V for invoicing.

But he allegedly did not tell the board that Infima was an offshore shell company with no employees, offices or assets that he and his wife, Gungor, owned.

Sipahioglu also did not disclose that he had negotiated a deal with Pepsi that gave Infima the exclusive rights to the Northern Cyprus territory.

The deal was “nothing more than a vehicle through which the Sipahioglus would begin to siphon millions of dollars of profits from Ektam,” the complaint states.

In 2010, the Erkman family discovered that Infima was overcharging the bottling company by 40% to 50%, according to the complaint, and they discovered that the Sipahioglus owned Infima.

In 2011, Dr. Erkman notified Pepsi CEO Indra Nooyi of the alleged fraud, according to the complaint, and Pepsi responded “that you and your fellow shareholders will need to resolve between yourselves.”

Dr. Erkman threatened to sue, and Pepsi agreed to stop invoicing through Infima.

By 2016, according to the complaint, Dr. Erkman was being frozen out of the bottling company’s management and had no access to business records.

In 2022, a company insider alerted the Erkmans that the invoicing scheme had resumed in 2016.

The Erkmans notified Pepsi and demanded that invoices be sent directly to Ektam bottling company. Pepsi allegedly refused.

The Erkmans claim that the Sipahioglus siphoned $80 million from the bottling company by inflating the invoices, and withheld $15 million in yearly dividends from the minority owners.

The minority owners accused Pepsi of aiding and abetting fraud and breach of fiduciary duty.