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Bribery Allegations Widen at Avon

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By: TOM BRANNA

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Ding dong…the Feds are calling. Prosecutors are investigating several former Avon Products Inc. employees, raising the prospect of criminal charges in an ongoing probe into allegations the company bribed foreign officials, according to The Wall Street Journal.

Since February, prosecutors in the Southern District of New York’s Complex Frauds Unit in Manhattan have interviewed or requested interviews with a handful of former employees, people familiar with the matter said. The Justice Department’s Fraud Section in Washington, which oversees foreign bribery cases, has been involved since last year, one person said. The inquiries raise the stakes in the door-to-door beauty company’s three-year internal probe into bribery allegations that began in China and then spread, including to Avon’s core markets in Latin America.

Prosecutors are seeking more information about the role employees at the company’s New York headquarters, including some former senior officials, may have played in possible violations of the Foreign Corrupt Practices Act, the people familiar with the matter said. Agents from the Federal Bureau of Investigation also made unsuccessful attempts to interview some former employees at their homes, the people said.

Currently, the questioning focuses on possible wrongdoing in China, one person familiar with the situation said.

“We don’t comment on ongoing investigations,” an Avon spokesman said.

No charges have been filed against any individuals or the company, and Avon’s own internal investigation remains ongoing. The company said it has been cooperating with the Department of Justice and Securities and Exchange Commission, which also pursues FCPA cases.

Spokeswomen for the Southern District of New York and the Department of Justice declined to comment. The probe of individual Avon employees comes as the U.S. government increasingly seeks to target executives, and not just companies, in alleged FCPA violations.


The act forbids companies that trade on U.S. exchanges from bribing foreign-government officials to gain a business advantage. Only two individuals were charged with FCPA or related offenses in 2004, according to DOJ statistics. That grew to 12 in 2008, 44 in 2009 and 11 in 2010, the statistics show.

Since June 2008, Avon has been investigating certain travel, entertainment and other expenses in China that it said that year might have “been improperly incurred.”


The investigation was sparked by an employee who wrote a letter to Avon Chief Executive Andrea Jung alleging improper spending related to travel with Chinese government officials.


Evidence of potential wrongdoing has been found in several countries, with internal investigators turning up millions of dollars of questionable payments to officials in Brazil, Mexico, Argentina, India and Japan, according to a person familiar with the matter. The possible wrongdoing happened as recently as last year and as far back as 2004, the person said.

The internal investigation has already claimed the jobs of some senior Avon managers with corporate oversight. Early this year, Avon said Bennett Gallina, former senior vice president responsible for Western Europe, Middle East, Africa, Asia Pacific and China, left the company after being suspended over the FCPA investigation.

In a filing this month, Avon said it had dismissed Ian Rossetter, the company’s former head of internal audit, after suspending him last year as part of the probe.


In that same filing, Avon disclosed it had fired three top China executives in conjunction with the probe. The executives had been suspended last year.
Avon says it spent $96 million on the investigation in 2010 and $35 million the year before. The company said Feb. 8 that it expects costs this year will be similar to the costs in 2010.

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