Since Mary Kay Corp. first approached Avon Products Inc. about a merger three years ago, Avon's sleuths have been digging for dirt. Sources close to Dallas-based Mary Kay, best known for the pink Cadillacs it awards star salespeople, say Avon's operatives have grilled associates of top officers, followed execs overseas, and spread harmful rumors about Avon's chief rival in direct sales of beauty products. Nonsense, says Avon.
Now, Mary Kay sniffs, the Avon Lady has simply gone too far in fending off takeover advances. She's been pawing through the Woman in Pink's trash. "We are outraged," complains John P. Rochon, vice-chairman of privately held Mary Kay and head of an affiliate that manages Mary Kay's Avon stake. "Our privacy has been invaded."
ROLL `EM. Avon's investigators, Kroll Associates, admit they hired Dallas gumshoes to carry out the deed. Chief investigator Jules B. Kroll says his detectives did no illegal or inappropriate work for Avon. They even videotaped the Dumpster to prove it was in a public parking lot. Says rival Ira A. Lipman, head of Memphis-based Guardsmark: "If you want to win, you'll resort to anything. Winners go for the garbage."
Mary Kay's trash soon will be under the scrutiny of Sullivan & Cromwell, Avon's tony Manhattan law firm. In a court filing, attorney D. Stuart Meiklejohn conceded the trash-snatching "is a departure from the discovery methods ordinarily employed by our firm." But he claims Mary Kay was trying to destroy possible evidence in a court case. Mary Kay denies this.
All this dirty work stems from Mary Kay's lengthy efforts to gain control of $3.5 billion Avon. After Avon fought off two takeover bids in 1989, Mary Kay joined forces with other investors to amass a 19.8% voting stake in Avon. The company's poison pill blocked the partnership, Chartwell Associates L. P., from buying more stock. So when Mary Kay suddenly split from Chartwell in January, Avon was understandably suspicious. It sued, accusing the partners of trying an end run. On Mar. 14, Chartwell sold most of its Avon shares. Rochon and a Mary Kay affiliate still hold 3% of the votes and insist they won't bail out.
PAPER TRAIL. If that's true, Mary Kay likely hasn't seen the last of Kroll. A lawyer for Mary Kay, David C. Musslewhite, says the company never thought Avon would stoop so low as to rifle the trash. He says Avon also has handwritten notes Mary Kay execs last saw in their offices in mid-February. The notes popped up in recent depositions in the suit involving Chartwell--alerting Mary Kay to the plunder of the Dumpster.
For all of the fuss, no one knows just what the private eyes snatched during three visits to the Dumpster. Most of the haul was paper that had been shredded, and Avon's lawyers haven't yet pieced the shreds together. When they do, thanks to a court-approved agreement, Mary Kay has the right to be there and can even videotape the stirring events. Nonetheless, Mary Kay wants its garbage back--and it's suing for damages.
Until it prevails, Mary Kay has beefed up security near the Dumpster. And executives are looking over their shoulders. When a friendly squirrel peered into a window on a recent afternoon, one Mary Kay adviser joked: "It might be Avon's `squirrel cam.' " You never know.