DOJ Catch of the Week -- Avon Products
By the C|C Whistleblower Lawyer Team
This week’s Department of Justice “catch of the week” goes to New York-based cosmetics company Avon Products. On Wednesday, its wholly owned subsidiary Avon Products (China) Co. Ltd. pleaded guilty to violating the Foreign Corrupt Practices Act (FCPA) by making and concealing illicit payments to Chinese government officials to secure business there. The company agreed to pay more than $135 million in criminal and regulatory penalties to resolve the charges. See DOJ Press Release.
According to the government, 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. Specifically, the companies sought to disguise more than $8 million worth of gifts, travel, meals and entertainment that Avon China executives gave to Chinese officials. Avon China tried to disguise the gifts and payments by falsely describing their nature or purpose, who they were provided to, or falsely recording the payments as being made to a third party intermediary for legitimate consulting services.
The companies also admitted that in late 2005 Avon learned that Avon China was routinely providing things of value to Chinese officials and failing to properly document them. Instead of halting the practice, fixing the false books and records, disciplining the culpable individuals, and implementing appropriate controls to address the problem, the companies took steps to conceal the conduct. The Avon entities will pay $67,648,000 in criminal penalties and agreed to implement rigorous internal controls, cooperate fully with DOJ and retain a compliance monitor for at least 18 months. Avon settled a related FCPA matter with the SEC, and will pay an additional $67,365,013 in disgorgement and prejudgment interest. See SEC Press Release.
In announcing the settlement — one of the largest FCPA settlements to date — the government emphasized its continuing campaign to crack down on foreign bribes. Assistant Attorney General Leslie R. Caldwell of DOJ’s Criminal Division said: “Public companies that discover bribes paid to foreign officials, fail to stop them, and cover them up do so at their own peril.” FBI Assistant Director Andrew G. McCabe echoed these strong words: “Companies who attempt to advance their businesses through foreign bribery should be on notice. The FBI, with our law enforcement partners, is continuing to push this unacceptable practice out of the business playbook by investigating companies who ignore the law.”