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WSJ: Grand Jury Hears Avon Case

Joe Palazzolo and Emily Glazer at the Wall Street Journal reported today that the DOJ has gone to a grand jury with evidence of FCPA violations against U.S. executives at Avon Products.

The story, based on at least three unnamed sources, said the focus is a ‘2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials.’

Avon disclosed the potential violations in 2008.

Late last month, the beauty-products giant fired vice chairman Charles Cramb. He held the post for less than a year. An earlier report in the Wall Street Journal linked him to reports that the China compliance issues were known since 2005.

In May last year, Avon suspended four executives allegedly involved in the bribery in China. Three were in China and one was in New York.

CEO Andrea Jong said in December she would resign. Her departure apparently was due to Avon’s financial performance. She hasn’t been linked to the bribery allegations.

Avon’s internal investigation launched in October 2008 apparently targeted the payment of improper promotional expenses that benefited Chinese officials.


Avon’s original FCPA disclosure said:

Avon Products, Inc. (NYSE: AVP) announced today, October 20, 2008, that it is voluntarily conducting an internal investigation of its China operations, focusing on compliance with the Foreign Corrupt Practices Act (“FCPA”). The Company, under the oversight of the Audit Committee, commenced in June 2008 an internal investigation after it received an allegation that certain travel, entertainment and other expenses may have been improperly incurred in connection with the Company’s China operations. The Company has voluntarily contacted the Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. The internal investigation is in its early stage and no conclusion can be drawn at this time as to its outcome.

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