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Avon pays out over China bribes

Avon, the world’s largest direct seller of cosmetics, has agreed to pay $US135 million to settle criminal and civil charges after its China business admitted conspiring to bribe officials there.

Avon China entered the plea in federal court in Manhattan, confessing to disguising $US8 million in gifts its employees gave to Chinese government officials over four years from 2004.

The gifts ‘bought’ the executives access to government officials who oversaw regulations relating to direct selling.

The bribes were disguised as entertainment, travel, cash and meals.

Avon agreed to pay $US68 million in criminal penalties and nearly the same amount in ‘disgorgement and prejudgment interest’ to end what was a civil case lodged by the US Securities and Exchange Commission.

“Avon’s subsidiary in China paid millions of dollars to government officials to obtain a direct selling licence and gain an edge over their competitors, and the company reaped substantial financial benefits as a result,” said Scott W Friestad, an associate director in the SEC’s Division of Enforcement.

The SEC said Avon won its first direct selling business licence in China in March 2006 after giving officials gifts including Louis Vuitton and Gucci bags and tickets to a corporate boxes at the China Open tennis tournament, amongst other things.

The court conceded that Avon had taken direct action to counsel staff in anti-corruption practices and had disciplined some executives involved, following the SEC probe. It had also directed staff to co-operate with the investigation prior to the suits being filed.

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