No amount of blush in the world could cover a scar this size — beauty company Avon Products Inc. may need to pay as much as $132 million to settle a federal bribery probe, according to reports.
The beauty company is under investigation for alleged breaches of the Foreign Corrupt Practices Act. The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) claim that Avon provided gifts and money to foreign government officials in exchange for contracts to sell its products in that country.
In an earnings report on Feb. 13, Avon announced that it has already set aside $89 million for potential penalties. However, after talks with the DOJ and SEC, the company believes it may have to add another $43 million to the status of the settlement.
Avon began an internal investigation into the case in 2008, and according to the Wall Street Journal, has already cost the beauty company $340 million in legal and other costs. The company offered to settle the case for $12 million in June 2013, but the government refused.
Avon Chief Financial Officer Kimberly Ross told the WSJ that Avon has enough liquidity to cover the penalties, but the company would surely like to have the investigation behind it in order to mitigate burgeoning costs. The earnings report revealed that Avon is still seeing a steady decline in sales in most countries, and the company’s total revenue fell 10 percent to $2.67 billion in the fourth quarter of 2013.
After a relatively slow 2013 in terms of FCPA prosecution, 2014 may indeed by the “Year of the Whistleblower.” The government ordered aluminum giant Alcoa to pay $384 million for FCPA violations in January to settle allegations of ongoing bribery of Bahraini government officials. Then, in February, former executives of Siemens were ordered to pay record fines for individuals for allegations of bribery.
The FCPA is back with a vengeance in 2014, and InsideCounsel has all the angles covered: