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Avon estimates it could pay $132m to settle bribery probe

By Michelle Yeomans+

19-Feb-2014

Avon says it has set aside $89 million for financial penalties, but adds it might have to stash a further $43 million based on the current status of its settlement talks.

In its most recent earnings report the global cosmetics player revealed it was still waiting to reach a deal with the Justice Department and Securities and Exchange Commission .

Avon filed with the Securities and Exchange Commission back in November, revealing that a proposed penalty from federal regulators months earlier was "significantly greater" than an offer it had made to settle the matter for $12 million to resolve the long-running investigation over the summer.

The firm had also expressed it was concerned the sum being proposed was of a 'significantly greater magnitude' and one that could put its business in hot water.

Eager to settle

Avon has been embroiled in a bribery investigation since 2008, when it had contacted the regulatory bodies to notify them of possible inappropriate actions with officials at the company possibly violating the Foreign Currency Practices Act to bribe foreign officials in China and potentially in Brazil, Mexico, Argentina, India and Japan as well.

It has already racked up to $340 million in legal and related costs since then, and reported a loss for its 2013 third quarter reflecting lower sales in North America and the Asia Pacific region.

According to Bloomberg, Avon could resolve the probe through a so-called deferred-prosecution agreement, with prosecutors filing charges and putting them on hold if the company makes payments and changes required by the government.

The whole case relates to on-going investigations into whether Avon breached the U.S. anti-bribery law by providing gifts or making payments to officials in China and other countries, which began in 2008.

Profits have taken a dip

In its last financial announcement for the first nine months of 2013 , Avon's profit declined 89% to $12.7m, on a 4% drop in revenues to $7.3bn, with company CEO Sheri McCoy commenting that it was a ‘tough’ quarter.

As part of cost-saving initiatives aimed at turning the company’s fortunes around, Avon also announced it was cutting a further 650 jobs , last December.

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