by Michael Connor
Avon Products Inc. confirmed that it had suspended four executives while it investigates allegations of bribes paid at its China unit.
The Wall Street Journal reported that New York-based Avon suspended the president, chief financial officer and top government affairs executive at its China unit and a senior executive in New York who was the company’s head of internal audit until the middle of last year,
With $10 billion in annual revenue, Avon is the world’s largest direct seller of beauty products, marketing in more than 100 countries through 5.4 million independent sales representatives. The Chinese government originally banned direct selling by Avon, but in February 2006 China’s Ministry of Commerce granted the company a direct-selling license. Avon now sells through a hybrid model that combines in-store and direct-to-consumer sales in China.
In its most recent 10-K filing with the U.S. Securities and Exchange Commission (SEC), Avon said it had voluntarily disclosed to the SEC and the Department of Justice internal investigations and compliance reviews which had “started in China” and focused on “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”
Avon said in its 10-K filing that the investigation had grown to include “additional countries.” The Wall Street Journal cited a source as saying those countries were in Latin America, a major source of revenue and earnings for Avon.
With its disclosure, Avon becomes the latest in a growing list of major Western companies dealing with violations of the U.S. Foreign Corrupt Practices Act (FCPA). Only two weeks ago, Mercedes car-maker Daimler AG agreed to pay $185 million to settle criminal and civil charges that between 1998 and 2008 it made at least $56 million in improper payments to officials in at least 22 countries to obtain government contracts for Daimler vehicles.
U.S. officials have made FCPA enforcement a top priority in recent years. By some estimates, the Department of Justice is currently investigating as many as 150 FCPA cases.
In February, British defense contractor BAE agreed to pay fines totaling almost $450 million to settle charges that it had made illegal payments to officials in various countries to obtain contracts. In late 2008, industrial giant Siemens agreed to pay more than $1.6 billion in fines and penalties to settle charges brought under the FCPA.