By Che Odom
April 18 — Avon Products Inc. has agreed to pay $4 million in legal fees and implement compliance reforms to settle a shareholder derivative action arising out of a subsidiary's bribery of foreign officials in China.
In the proposed settlement, Avon agreed to adopt a global anti-corruption policy and code of conduct, as well as implement specific Foreign Corrupt Practices Act testing.
The company also agreed to dedicate compliance staff in each business unit to FCPA matters, conduct a quarterly certification of FCPA compliance and take steps to ensure that its chief ethics and compliance officer and audit committee have access to all hosting and gift request forms.
Tom Fox, a Houston-based attorney who provides compliance and risk management services, told Bloomberg BNA in an e-mail that there is little difference between what Avon is promising the shareholder plaintiffs and what it agreed to implement in its 2014 settlement with the Justice Department and the Securities and Exchange Commission . He said, for example, that the company agreed to adopt a global anti-corruption policy in its deal with the regulators.
Fox added that while the steps Avon promised to take are not ground-breaking, they are “certainly best practices.” All companies that do business internationally should have a code of conduct applicable to all their employees and operations, he said.
Avon representatives did not return calls for comment. However, the company said in its filing that the settlement with shareholders was “in the best interest” of the company and its investors.
Avon, the world's largest door-to-door seller of cosmetics, described the proposed settlement in a regulatory filing April 13. The proposed settlement, which would end litigation over a derivative suit brought in New York Supreme Court—Cnty. of York Emps. Ret. Plan v. Jung, docket No. 651304/2010—does not require Avon to admit any wrongdoing or liability. The court will decide whether to approve the deal June 30.
Avon in December 2014 ended a six-year U.S. probe into allegations that it engaged in overseas bribery with a guilty plea by its Chinese subsidiary .
The company, which spent at least $344 million on an internal investigation of corrupt payments, agreed earlier that year to pay $135 million to settle U.S. criminal and civil claims, including those involving FCPA violations.
Since 2010, Avon has been embroiled in legal battles in New York federal and state courts over shareholder claims that its directors and officers committed breaches of fiduciary duties and proxy disclosure violations related to the bribery allegations.
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Avon's stipulation of compromise and settlement is available at http://www.sec.gov/Archives/edgar/data/8868/000000886816000123/exhibit992stipulationofset.htm.
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