The Securities and Exchange Commission is charging Avon Products Inc. with Foreign Corrupt Practices Act violations. The regulator claims that the global beauty products company did not put into place controls that could have allowed it to detect and stop gifts and payments made to Chinese government officials. To settle the SEC charges, as well as a parallel case brought by the U.S. Justice Department, Avon entities have consented to pay $135M.
According to the SEC, Avon’s Chinese subsidiary made $8 million of payments in gifts, money, travel, and entertainment to obtain access to government officials involved in direct selling regulations in China. Avon wanted to be the first to test the regulations and in 2006 it was the first to obtain a direct selling business license in that country. Improper payments were purportedly made by the company to prevent negative news stories and fines that could have affected its image. Such payments allegedly included paid travel within China or to Europe or the US, expensive designer gifts, and corporate box tickets to the China Open.
The improper payments allegedly happened from 2004 to 2008. After discovering the possible FCPA issues at the Chinese subsidiary in 2015 and looking further into the matter, no reforms were made. It wasn’t until 2008 that a full internal probe was conducted and only after a whistleblower sent Avon’s CEO a letter.
The SEC says that company’s records and books did not accurately record the purpose of the payments that were made to the Chinese officials. Some payments were even allegedly concealed and disguised.
Also accused of FCPA violations that benefited Chinese officials is Bruker Corporation, which is based in Massachusetts. The regulator claims that the scientific instruments global manufacturer gave government officials from the East Asian nation improper payments and non-business related travel in order to win business.
Per an SEC probe, Bruker did not have the proper internal controls to stop and detect nearly $230K in improper payments issued out of its offices in China, where they were falsely documents in records and books as real business and marketing costs. The payments allowed Bruker to achieve close to $1.7 million in profits from sales contracts with Chinese government-owned entities.
The allegedly improper payments included over $111,000 to government officials under numerous collaboration agreements. These deals were dependent upon state-owned entities providing research on Bruker products or using the company’s products in demonstrating labs. Also, there were reimbursements made to Chinese government officials for leisure trips to the U.S., Italy, the Czech Republic, Switzerland, Norway, Germany, France, and Sweden, as well as other inappropriate payments.
It was Bruker that self-reported its own misconduct, cooperating with the SEC probe. It eventually consenting to pay about $2.4 million to resolve the SEC charges.
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Read the SEC Complaint Against Avon (PDF)
Read the Order for the Bruker Case (PDF)
Spotlight on Foreign Corrupt Practices Act, SEC
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