Feds Reject Avon Offer To Settle Bribe Charges

Avon Products said that its offer to settle bribery allegations overseas for $12 million was rejected by US authorities. Avon has been hampered by the investigation since 2008, when it contacted the US Justice Department and the Securities and Exchange Commission to notify them of possible inappropriate actions in China. The investigation has since spread to other countries.


The company's second-quarter net income slumped 48% and sales fell 2% to $2.5 billion due to tougher currency rates and weak North American sales. Still, the company beat Wall Street expectations. Avon earned $31.9 million, or 7 cents per share, for the three months ended June 30. That's down from $61.6 million, or 14 cents per share, a year ago.


The quarter included a $79 million charge related to an expected loss on the sale of the Silpada jewelry business. Avon announced in July that it was selling Silpada back to its co-founders and their families for $85 million, much less than what it paid three years ago. Silpada sells sterling silver jewelry at home parties. Avon purchased Silpada Designs in July 2010 for $650 million. Silpada was classified as discontinued operations in the current quarter. Taking out Venezuela-related charges and other items, earnings from continuing operations were 29 cents per share, which was 2 cents better than Wall Street had expected, according to a FactSet survey.


In commenting on its offer to settle bribery charges, the company said, “Although we expect that the DOJ and the SEC will make a counterproposal to our offer, they have not yet done so. Our discussions with the DOJ and the SEC are ongoing.”


Second quarter sales in North America declined 12%, hurt by a 13% drop in the number of active sales representatives. Asia-Pacific sales fell 9%, while sales in Latin America and Europe, the Middle East and Africa rose. Avon said its revenue performance climbed 2% on a constant dollar basis. Prices rose in the quarter, while the average order size increased.