The largest door-to-door seller of cosmetics in the world has agreed to shell out $135 million in order to settle the criminal and civil probes in the US on whether the company has paid bribes in China and other companies. Avon Products Inc will pay $68 million to the US Justice Department and $67 million to the Securities and Exchange Commission as part of a deferred-prosecution agreement, according to the company in a regulatory filing made today. The filing also revealed that as part of the accord, its Chinese unit will be pleading guilty to books and records violation under the Foreign Corrupt Practices Act. The company has also agreed to be monitored for compliance for a minimum of 18 months.
Bloomberg said that the five-year probe on the company has cast a shadow on Avon, which had since been struggling with slowing growth and net losses for the last two years. Moreover, the company has undergone a slew of changes in its executive suite in the wake of the inquiry.
The Wall Street Journal said although both parties had come to a settlement, the accord will still require an approval from a court and from SEC. The probe on Avon resulted in charges that the company allegedly gave gifts and improper payments to Chinese officials in exchange for licenses to be able to sell its wares in the mainland.
WSJ said that the financial penalties proposed in the settlement are a lot bigger than the profits Avon has gained in China.
Following the departure of Andrea Jung, new Chief Executive Officer Sheri McCoy has been working on a settlement with the US government while trying to reduce the company's costs, the news agency said. McCoy has also plans to abandon unprofitable markets such as Ireland, South Korea and Vietnam.
Discussing about investors' opinion about Avon not being able to make its long-term goals, McCoy said, "We're certainly comfortable in our goals. I am not satisfied with our performance, but I am encouraged by our progress."
