Avon Products Shareholder Seeks Records Over Bribery Probe

An Avon Products Inc. (AVP) shareholder asked a New York court to compel the cosmetics maker to let it inspect its books and records in connection with a bribery probe.

The York County, Pennsylvania, retirement plan today asked a New York state Supreme Court judge in Manhattan to order Avon to allow it to inspect the company’s books and records in order to identify “mismanagement and breaches of fiduciary duties” by the board and executives and assess whether the directors lack the “independence necessary to exercise their business judgment,” according to the court filing.

The case arises out of an internal probe into potential violations of the Foreign Corrupt Practices Act in 2008 that has escalated into a U.S. Securities and Exchange Commission investigation of Avon, according to the court filing.

In regulatory filings last year, Avon said it had fired four executives suspected of paying bribes to officials in China. The company also disclosed an internal investigation into its compliance with the FCPA. The ex-executives included the general manager and finance chief of the China unit, which generates 2 percent of Avon’s revenue.

‘Internal Controls’

“Despite having spent over $240 million, conducting a four-year investigation which it admitted has no end in sight, and having knowledge that Avon executives are sabotaging efforts to implement internal controls designed to comply with the FCPA, Avon has refused to produce the requested documents,” lawyers for the plaintiffs said in the filing.

Avon said in October that it was the subject of SEC probes into its international operations and its dealings with financial analysts. A person familiar with the matter said in February that the company is also the subject of a U.S. grand jury investigation into whether ex-employees in China paid bribes to officials in violation of U.S. anti-corruption laws.

Avon confirmed on May 11 that the SEC is investigating trading activity before Coty Inc. (COTY) offered to buy the door-to-door cosmetics retailer last month for $10 billion.

York County has been a shareholder of New York-based Avon since at least July 2005 and currently owns about 21,500 shares, according to documents filed in New York State Supreme Court in Manhattan today.

An Avon Products spokesperson didn’t immediately return a voice-mail message seeking comment on today’s court filing.

The case is County of York Retirement Plan v. Avon Products Inc., 651673/2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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