Avon to pay $135 mn to US regulators to settle China bribing probe

US beauty products company Avon Products yesterday agreed to pay $135 million to the US regulators as part of a settlement for bribing Chinese officials in order to allow it to sell products directly to consumers in the country.

As part of the settlement, Avon, the world's largest direct seller of beauty products, will pay $67.6 million to the Department of Justice (DoJ) and the remaining to the US Securities Exchange Commission (SEC) to resolve a bribery investigation under the Foreign Corrupt Practices Act.

The US government probe under the Foreign Corrupt Practices Act, which began in 2011 after an internal Avon investigation in 2008, revolves around alleged bribing at least $8 million to Chinese government officials to get licenses to promote its goods by showering gifts and funding their trips to France, New York, Canada and Hawaii.

The DoJ said that the gifts, which included meals, expenses and travel, as well as the ''personal luxury items like designer wallets, bags or watches, was in exchange for Chinese officials giving Avon China direct sales licenses and favorable judicial treatment.

''For years in China it was 'Avon calling,' as Avon bestowed millions of dollars in gifts and other things on Chinese government officials in return for business benefits,'' said US Attorney Preet Bharara.  ''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.''

These payments were disguised as business entertainment, employee travel, and public relations business entertainment in the company's records.

''Companies that cook their books to hide improper payments will face criminal penalties, as Avon China's guilty plea demonstrates,'' said Assistant Attorney General Caldwell.  ''Public companies that discover bribes paid to foreign officials, fail to stop them, and cover them up do so at their own peril.''

''From at least 2004 through 2008, Avon and Avon China conspired to falsify Avon's books and records by falsely describing the nature and purpose of certain Avon China transactions,'' said the DoJ in a statement.

''Instead of ensuring the practice was halted, fixing the false books and records, disciplining the culpable individuals, and implementing appropriate controls to address this problem, the companies took steps to conceal the conduct, despite knowing that Avon China's books and records, and ultimately Avon's books and records, would continue to be inaccurate, the statement added.