Avon Board Sued by Shareholders for Failing to Monitor Payments in China
Avon Products Inc. shareholders sued the board and three former directors of the world’s largest door-to-door cosmetics seller, claiming they failed to prevent improper payments in China.
The lawsuit, filed yesterday in New York state Supreme Court in Manhattan, stems from travel, entertainment and other expenses allegedly provided to a senior official at China’s Ministry of Commerce. China granted Avon a license allowing door-to-door marketing in February 2006, about two months after lifting a ban on direct selling.
Avon, based in New York, said in April it suspended four executives as part of an internal investigation. Directors’ failure to ensure that Avon complied with the Foreign Corrupt Practices Act led to substantial losses for the company, according to the complaint, brought on Avon’s behalf by County of York Employees Retirement Plan.
Avon’s license approval in China was attributed to Deng Zhan, deputy director of the foreign fund division of the Ministry of Commerce, the pension fund said, citing news reports. He was detained in September 2008 for allegedly accepting bribes, according to the complaint targeting 13 current and former Avon directors.
Avon doesn’t comment on pending litigation, spokeswoman Sharon Samuel said in a telephone interview.
Avon said in October 2008 that it started a voluntary investigation into compliance with the FCPA, which outlaws bribing of foreign officials. The probe had spread to at least a dozen countries as of June, court papers show.
Avon rose 29 cents to $29.39 at 2:31 p.m. in New York Stock Exchange composite trading.
The case is County of York v. W. Don Cornwell, 651065/2010, New York state Supreme Court (Manhattan).
To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net.
Rate These Stories
Rate this Page