Avon suspends 4 execs in China investigation
The direct-seller launched the investigation last year after it said it received an allegation that "certain travel, entertainment and other expenses may have been improperly incurred in connection with the company’s China operations."
“As part of this investigation, four Associates have been asked to take administrative leaves of absence pending the outcome of the matter,” an Avon spokesperson confirmed to CosmeticsDesign.com USA.
Although the spokesperson did not detail which Associates were involved, the Wall Street Journal reported that three of the four were part of the company’s China unit.
The WSJ named them as S.K Kao, general manager of Avon China; Jimmy Beh, the unit's former head of finance; C.Q Sun, head of corporate affairs in China; and Ian Rossetter, previous head of Avon's internal audit and most recently on special assignment as vice president of global finance.
Customary action
The Avon spokesperson underlined that this action “is customary during investigations like this and has been taken in connection with the investigation and our compliance efforts.”
According to the company, the duration of the investigation is unknown, and as of yet, no conclusions have been reached.
The investigation is focusing on the compliance with the Foreign Corrupt Practices Act (FCPA), and is being carried out under the supervision of the Audit Committee and conducted by external counsel.
The company said it also notified the US Department of Justice and the US Securities and Exchange Commission.
Falling share prices
China represents only a small percentage of the company’s sales, which could limit the potential damage of the accusations. China revenue for annual 2009 came in at $353.4m, representing 5.7 percent of the company’s $10.4bn total revenue.
Nevertheless, as a result of the recent development, Avon’s share price dropped 8 percent to $31.99 on Monday from the previous price of $34.76.
Deutsche Bank analyst Bill Schmitz was quoted in the WSJ as saying "The big fear is that the problem isn't just in China. If this spreads beyond China, it could be catastrophic."
