Law firm investigates Avon over payments to foreign officials

By Simon Pitman

- Last updated on GMT

Following initial investigations by US Federal prosecutors into Avon Products’ operations in China, law firm Finkelstein Thompson says it is now launching an official investigation of the company worldwide.

Citing a newspaper article from the Wall Street Times dated May 4 of this year, the company says that internal investigations have shown that since 2004 the company may have made millions of dollars in unofficial payments to officials all over the world.

The law firm highlights that, beyond China, the company may also have made illegal payments to officials in countries including Brazil, Mexico, Argentina, India and Japan.

The internal investigations were begun in June of 2008, aimed at discovering whether or not officials at the company had violated the Foreign Currency Practices Act – a law that makes it illegal for US businesses to bribe foreign officials.

Shareholders rights

Finkelstein Thompson says it will provide information for Avon shareholders on their rights in relation to the investigation, as well as asking if any shareholders have any information relating to the matter.

Once Avon had confirmed that it was expanding its corruption investigation in China, federal prosecutors stated they wanted to interview more staff as part of the expanded investigation.

The Wall Street Journal report stated that the US Federal prosecutors in New York City confirmed that they had questioned a number of former Avon staff, and also confirmed that they wanted to expand the investigation to question yet more staff.

Four execs suspended and later fired

Initially the company announced the suspension of four executives in April of last year, following an investigation that was first initiated when the matter came to light, in 2009.

Those four executives – three of whom were based in China, the other being the company’s chief of global internal audit and security – were all fired over bribery charges that included improper use of travel and entertainment expenses.

But at the time Avon said it would be making more in depth investigations into the charges, which challenge that the executives flouted the FCPA.

Mounting costs loom over small China turnover

The SEC filing at the beginning of May stated that an investigation of possible bribery of foreign officials in China, citing the fact that the four executives who had previously been under suspension have now been fired.

The cost of the internal investigation has taken its toll on Avon, leading to an additional bill of almost $100m last year, while Avon estimates that the investigation expenses will be around the same this year.

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