1. Avon Products Bribery Scandal in China
By Kia Allen & Marie Claire Llareus

2. Ethical Issue: Bribery
Bribery: the offering or taking of something of value to influence persons or gain an unfair advantage
Bribery raises moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions.
In other countries, bribery is a culturally expected part of doing business and business relationship building. In China, a relationship-based business is highly valued.

3. Case Study
Avon Products Inc. vs. U.S. Securities & Exchange Commission
In June 2008, there were bribery allegations in Avon’s China division. An Avon employer paid thousands of dollars to Chinese government officials and third-party consultant agencies in order to obtain governmental permission to conduct door-to-door sales in China.
The allegations later extended to Avon’s Brazil, Mexico, Argentina, India, and Japan division.
Federal prosecutors found questionable payments dating back to a September 2005 draft internal report.

4. Timeline 2006 2007 2008 2009 2010 2011 2012 DEC 13- AVON announced
it initiated a search for a new chief executive. CEO
Andrea Jung announced
stepping down and staying on
as executive chairman.
Timeline
At least 4 AVON
executives were
suspended (in
both Asia and
U.S.)
JUNE- An investigation began regarding allegations of
bribery in the China division which extended to
other countries (an allegation of improper
expenses for items like travel and entertainment
on behalf of a Chinese government official.
MAY 5- AVON
announced
firing 4
executives.
2006
2007
2008
2009
2010
2011
2012
FEB 24- AVON filed a report with
The Securities and Exchange
Commission (SEC) highlighting the
event as a corporate risk factor
that could cause investor loss.
4th quarter sales of
AVON’s China business
posted an 8 percent
drop in revenue and
an operating loss of
$3 million.
U.S. sales hit $2.62 billion,
only to start shrinking in
the following years.
AVON spent $122.5 million
on legal fees and
costs related to the
investigation
since 2009.
AVON won a
direct selling
license and was
approved to return
to China.
OCT- AVON launched an internal
investigation into possible
foreign Corrupt Practices Act (FCPA)
violations in China (appeared to
be linked to the payment of
improper promotional expense).
AVON reports the number of North
American “reps” fell 8 percent in
2011 and says it is planning job cuts.

5. Organizational Chart Avon Products Inc. Andrea Jung
(Former CEO; current executive chairman)
S.K. Kao
(Former China Avon President)
Jimmy Beh
(Former China CFO)
C.Q. Sun
(Former head of corporate affairs for China)
Ian Rossetter
(Former head of global internal audit and security in New York)
Charles Cramb
(Former Vice Chairman; Chief Finance and Strategy Officer)
Avon Products Inc.

6. Organizational Chart (cont.)
Prosecutors
U.S. Securities and Exchange Commission (SEC)
Federal Bureau of Investigation (FBI)
The Southern District of New York’s Complex Frauds Unit in Manhattan

7. Proposal