According to the world's largest door-to-door seller of cosmetics, it could spend up to $132 million in order to settle civil and criminal inquiries whether it paid bribe money in countries. including China. Avon Products Inc said yesterday that it just added $77 million in the fourth quarter for its potential settlements with the US Department of Justice and US Securities and Exchange Commission. The company also added that it could spend more than the total $89 million legal costs allocation by up to $43 million.
Bloomberg said Avon has spent over $300 million in the last five years, thanks to an internal investigation and compliance reviews amid a bribery probe. Avon has been under investigation by US regulators for possible violations of the Foreign Corrupt Practices Act, which bans money payments or anything similar of value to foreign officials in order to keep its business running.
The probe had started in Mid-2008, in which Avon has been looking into claims of improper payments in the mainland. In May of 2011, the company fired four of its executives who were connected to the bribery inquiry and elected a new head for its China unit in 2012. Chief Executive Officer Sheri McCoy attempted to end the probe by trying to reach a settlement with authorities. Bloomberg said that the probe partly contributed to Avon's market share decline.
On the other hand, a person familiar with the probe told the news agency that the probe could reach a settlement this week. In its earnings call yesterday, McCoy told attendees, "We've made significant progress. (Negotiations with the government are continuing and) while differences remain, our team is working hard to bring these matters to a close."
Aside from the market share loss, it was natural for Avon to cut its workforce in unprofitable markets. In December last year, Avon revealed its plans to reduce 650 jobs in order to save $400 million in costs by year 2016. Bloomberg said that cuts and other measures to keep the company afloat are expected to be finalized this year, but could result to a $45 million charge pretaxes, Avon had said in a filing made on December 13.
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