Avon Products and lawyers representing investors asked a federal judge in New York Tuesday to approve a $62 million settlement in a securities fraud lawsuit that alleged the company and two former officers failed to disclose problems with company’s FCPA compliance in China.
The proposed settlement and pleadings supporting it were filed in the U.S. District Court in Manhattan.
Motley Rice is lead counsel for the plaintiffs, and Wachtell Lipton represents Avon. The suit was first filed in 2011.
Judge Paul G. Gardephe has to decide if the settlement is fair to the class of plaintiffs, who could number in the tens of thousands, Motley Rice said.
The class represented in civil suit were shareholders from July 31, 2006 to October 26, 2011. Two German investment funds were the named plaintiffs on the suit.
The shareholders alleged that Avon and former CEO Andrea Jung and former CFO Charles Cramb misled shareholders about the company’s compliance with the FCPA in China.
In December last year, Avon paid $135 milion to settle an FCPA enforcement action.
A China subsidiary paid a criminal fine of $67.7 million after pleading guilty to one count of conspiring to violate the FCPA. The Avon parent entered into a three-year deferred prosecution and appointed a compliance monitor.
Avon Products also agreed to settle FCPA civil charges brought by the SEC with a payment of more than $67 million.
The Chinese subsidiary made $8 million worth of payments in cash, gifts, travel, and entertainment to various Chinese officials, the DOJ said. Avon needed their approval for direct selling in China. In March 2006, it became one of the first companies to receive a direct selling license.
Avon, the world’s biggest door-to-door retailer of cosmetics, spent more than $300 million on its internal FCPA investigation, according to reports.
Former chief executive Andrea Jung left the company in 2012 after leading it for a dozen years.
Avon fired former CFO and vice chairman Charles Cramb in early 2012.
Judge Paul Gardephe dismissed the shareholder suit in September 2014. He said there was no proof Avon or its officers intended to decieve investors. But he allowed the plaintiffs to file an amended complaint.
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A copy of the proposed settlement in City of Brockton Retirement System et al v. Avon Products Inc et al, U.S. District Court, Southern District of New York, is here (pdf). Motley Rice’s memorandum in support of the settlement is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.