Avon settles foreign bribe case for $135 Million, third largest settlement of its kind

Avon Products Inc. settled its case involving foreign bribes by paying $135 Million, which is the third largest settlement against a U.S. company for foreign bribes, ever. The case was brought by the Securities and Exchange Commission (SEC) and related to Avon China’s business unit. The government alleged that Avon’s subsidiary in China paid millions of dollars to government officials to obtain a direct selling license and gain an edge over their competitors, and the company reaped substantial financial benefits as a result. The New York-based company had given luxurious items including Louis Vuitton merchandise, Gucci bags, Tiffany pens, as well as tickets to China open tennis tournament to officials and had adjusted the expenditure in its books as “business entertainment,” “employee travel” or “public relations business entertainment,”

In its 2009 Annual Report, Avon noted that the internal investigation and compliance reviews, which started in China, had now expanded to its operations in at least 12 other countries and was focusing on reviewing “certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and their employees.” The Wall Street Journal (WSJ), reported that Avon suspended four employees, including the President, Chief Financial Officer (CFO) and top government affairs executive of Avon’s China unit as well as a senior executive in New York who was Avon’s head of Internal Audit.The initial information about the foreign bribes came from a whistleblower.

Jeffrey Newman represents whistleblowers