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Avon Leader Departing Amid Bribery Probe

Avon’s Andrea Jung will step down as executive chairman at the end of the year. Photo courtesy of Avon Products Inc.Avon Products Inc. said Friday that long-time executive chairman Andrea Jung will leave her post at the end of December.

Jung, 54, joined Avon in 1994 and held the CEO post from 1999 until April this year. 

Replacing Jung will be Pakistan-born Fred Hassan. Avon said he’ll act as non-executive chairman. He’s a managing director and partner at Warburg Pincus and the former chairman and CEO of Schering-Plough Corp.

In October 2008, Avon launched an internal investigation into possible Foreign Corrupt Practices Act violations in China. The investigation was linked to the payment of improper promotional expenses.

Avon has spent about $280 million on the investigation.

In February the Wall Street Journal reported that the DOJ had gone to a grand jury with evidence of FCPA violations against U.S. executives at Avon.

The story said the focus of the grand jury was a ‘2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials.’

Avon fired vice chairman Charles Cramb in January this year. He held the post less than a year. An earlier report in the Wall Street Journal linked him to compliance issues in China known since 2005.

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

In a statement Avon released Friday, Jung said, ‘My decision reflects the successful transition to new leadership. I believe the end of the year is the appropriate time for me to shift my role from executive chairman to senior advisor.’

Avon’s stock has declined about 50% over the past two years. The stock price rose more than 7% Friday on news of Jung’s departure.

Avon is the world’s biggest direct marketer of women’s beauty products. Revenues last year were over $11 billion. The company does business in more than 100 countries through 6 million independent sales representatives who sell from their homes and door-to-door.

Avon Products Inc. trades on the New York Stock Exchange under the symbol AVP.

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