Foreign bribe case at Avon presented to grand jury

Federal prosecutors investigating whether U.S. executives at Avon Products Inc. broke foreign-bribery laws have presented evidence in the probe to a grand jury, people familiar with the matter said.

Authorities are focused on a 2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act, according to three people familiar with the matter. Avon had earlier said it first learned of bribery allegations in 2008.

The audit found several hundred thousand dollars in questionable payments to Chinese officials and third-party consultants in 2005, one of these people said. It came as Avon was pursuing a license to conduct door-to-door sales in China. Some of the payments were recorded on invoices as gifts for government officials, the person said. Avon secured China's first such license to a foreign company in 2006.

The Federal Bureau of Investigation and U.S. prosecutors in New York and Washington are trying to determine whether current or former executives ignored the audit's findings or actively took steps to conceal the problems, both potential offenses, two people familiar with the matter said.

Executives at Avon headquarters in New York who saw the audit report at the time didn't disclose its findings to the board's audit committee, finance committee or the full board, according to people familiar with the investigation. Board members didn't learn of the audit report until after Avon launched its own internal investigation of overseas bribery allegations in 2008, say the people familiar with the situation.

Federal prosecutors investigating whether U.S. executives at Avon Products Inc. broke foreign-bribery laws have presented evidence in the probe to a grand jury, people familiar with the matter said.

Authorities are focused on a 2005 internal audit report by the company that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act, according to three people familiar with the matter. Avon had earlier said it first learned of bribery allegations in 2008.

The audit found several hundred thousand dollars in questionable payments to Chinese officials and third-party consultants in 2005, one of these people said. It came as Avon was pursuing a license to conduct door-to-door sales in China. Some of the payments were recorded on invoices as gifts for government officials, the person said. Avon secured China's first such license to a foreign company in 2006.

The Federal Bureau of Investigation and U.S. prosecutors in New York and Washington are trying to determine whether current or former executives ignored the audit's findings or actively took steps to conceal the problems, both potential offenses, two people familiar with the matter said.

Executives at Avon headquarters in New York who saw the audit report at the time didn't disclose its findings to the board's audit committee, finance committee or the full board, according to people familiar with the investigation. Board members didn't learn of the audit report until after Avon launched its own internal investigation of overseas bribery allegations in 2008, say the people familiar with the situation.

(Published by WSJ - February 13, 2012)