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Alleged FCPA Violations Bring Avon Products Before Federal Grand Jury

February 13, 2012 — Avon Products faces allegations that its executives, particularly those in China, may have violated anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). The investigation into possible wrongdoing was prompted by the uncovering of a 2005 internal report, although the probe extends to conduct that occurred after 2005 as well, such as providing dinners and entertainment for Chinese officials.

Avon has also used third-party consultants in China. Since payments to such consultants are a possible conduit for illegal bribes, prosecutors will seek to determine whether these consultants were providing legitimate services for which they were being paid.

A whistleblower from inside the company brought concerns about possible FCPA violations to Avon CEO Andrea Jung, concerns reflected in the 2005 internal report. In 2006, Avon became the first Western company to be given license for door-to-door sales in China. Then, in 2008, Avon initiated an internal investigation of whether its Chinese operation had violated the FCPA. That investigation has reportedly expanded to consider conduct outside China as well.

Since the internal investigation was begun, former CFO Charles Cramb has left the company, three of Avon’s executives in Asia have been fired, and CEO Andrea Jung has stated that she will step down as soon as a new CEO is identified.

Avon’s internal investigation may have been admirable, but the 2005 report is significant because it makes clear that at least some employees were aware of possible FCPA violations years before Avon took action.

While Waters & Kraus is not handling this particular foreign bribery case, we are involved in bringing similar cases. If you have similar claims against your employer or another business, contact us or call our attorneys at 855.784.0268.

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