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Avon may have paid for auditor’s silence in bribery suit

Amended suit claims company offered employee extra benefits to keep quiet

Avon Products Inc. shareholders filed an amended lawsuit this week claiming the head of the company’s internal audit department was able to extract a larger severance package upon his 2006 termination than he otherwise would have by threatening to reveal evidence of Avon’s involvement in bribery to officials.

The suit says Fabian LaPresa, Avon’s former global internal audit director, threatened to turn over a draft of a 2005 internal report that showed executives paid bribes to Chinese officials as the New York-based cosmetic company sought to sell its products door-to-door in China. The company had originally planned to fire LaPresa for misuse of his expense account and offer him only three month’s salary and benefits.

But the lawsuit claims after LaPresa made his threat, the severance package was pumped up to include one year’s salary and health benefits rather than only three months in exchange for his silence. Avon CFO Charles Cramb would have had to approve the extra benefits, suggesting Cramb knew about the possibility of Avon’s involvement in bribery since 2006.

Thomson Reuters reports that prosecutors are now investigating whether there was any attempt among Avon executives to take action based on the report, which flagged concerns about the company’s compliance with the Foreign Corrupt Practices Act (FCPA), or if they ignored or tried to hide it.

Last fall, federal prosecutors began investigating Avon for possible violations of the FCPA, three years after the company launched its own internal investigation. 

 

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Cathleen Flahardy

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