Avon Products Inc. (AVP) has opened talks with the U.S. Justice
Department and U.S. Securities and Exchange Commission to settle an
investigation into possible bribery of foreign officials, as the
company moves to end a distracting and expensive probe now entering
its fifth year.
At issue is whether Avon may have paid bribes to officials in
China and elsewhere in violation of the U.S. Foreign Corrupt
Practices Act. The investigation has tarnished Avon's reputation
and racked up nearly $280 million in legal costs.
The audit committee of Avon's board began investigating the
matter in 2008 and notified the Justice Department and Securities
and Exchange Commission, which are conducting their own probes. The
effort to settle, disclosed in a securities filing Wednesday, comes
as new Chief Executive Sheri McCoy works to turn around years of
poor performance at the door-to-door beauty products company.
Avon disclosed the move along with another weak quarter. Avon's
profit fell 70% to $61.6 million, as its revenue fell 9% to $2.6
billion.
"Avon's second-quarter financial results are not good," Ms.
McCoy said in a news release.
Wednesday's filing didn't reveal any specifics of the settlement
talks or say whether Avon might face penalties. "There can be no
assurance that a settlement will be reached or, if a settlement is
reached, the timing of any such settlement or that the terms of any
such settlement would not have a material adverse effect on us,"
Avon said in the filing.
The company said it still isn't able to predict where the
internal and government investigations might lead. "These matters
are still ongoing, we are unable to make an estimate of the amount
or range of loss that it is reasonably possible that we could incur
from an unfavorable outcome," the company said.
Prosecutors have been interviewing former Avon executives for
more than a year trying to determine whether people at the
company's New York headquarters ignored or concealed evidence of
possible bribes, people familiar with the matter have said.
Representatives of the Justice Department and SEC didn't
immediately respond to requests for comment.
Write to Joe Palazzolo and Emily Glazer at
joe.palazzolo@wsj.com
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