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From Securities Regulation Daily, December 17, 2014

Avon to resolve FCPA charges for $135 million

By Mark S. Nelson, J.D.

Avon Products, Inc. has agreed to pay $135 million to resolve SEC and Department of Justice charges under the Foreign Corrupt Practices Act (FCPA) based on its failure to account for payments some of its entities made to Chinese government officials. According to the SEC, the payments took place between 2004 and 200, and ran afoul of Exchange Act provisions governing internal controls and books and records (SEC v. Avon Products, Inc., December 17, 2014).

Avon neither admitted nor denied the SEC’s charges, but Avon admitted criminal conduct in a related deferred prosecution agreement with the DOJ, while its Chinese subsidiary pleaded guilty to a criminal information. Both the SEC and DOJ filed their cases in federal court today in Manhattan.

Scott W. Friestad, associate director, SEC Enforcement Division, said Avon made the payments to outpace its rivals for direct selling opportunities. “Avon missed an opportunity to correct potential FCPA problems at its subsidiary, resulting in years of additional misconduct that could have been avoided.”

In the parallel criminal matter, Avon’s subsidiary, Avon Products (China) Co. Ltd. pleaded guilty to conspiring to violate the FCPA’s accounting provisions. Manhattan U.S. Attorney Preet Bharara cited the long duration of Avon’s payments to Chinese officials. “Avon China was in the door-to-door influence-peddling business, and for years its corporate parent, rather than putting an end to the practice, conspired to cover it up.  Avon has now agreed to adopt rigorous internal controls and to the appointment of a monitor to ensure that reforms are instituted and maintained.”

The case is No. 14 CV 9956.

Attorneys: Scott W. Friestad for the SEC.

Companies: Avon Products, Inc.; Avon Products [China] Co. Ltd.

MainStory: TopStory NewYorkNews AccountingAuditing Enforcement

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