Lessons to Be Learned From Avon’s FCPA Experience

Avon Products Inc. announced recently that it could face penalties from the U.S. Department of Justice and the Securities and Exchange Commission for alleged violations of the Foreign Corrupt Practices Act (FCPA).

The beauty products company faces an ongoing government investigation of its alleged payment of bribes in China and other countries that it paid in exchange for government permits it needed to open new markets. In an SEC filing, Avon said it could face FCPA penalties of as much as $132 million. Avon fired four executives who were allegedly involved in the bribery scheme.

But it’s not just an international giant like Avon that can face significant penalties or even jeopardize its very existence by running into trouble with foreign bribery.

Essentially, any company that does business outside the United States or with partners that are non-U.S. companies can run these grave risks.

Even a relatively small company that has not formally launched a “going global” program may have left itself open to a possible FCPA violation as a result of any business it may have done beyond our shores. And many of those companies have probably have not taken the time to put in place a violation avoidance program.

Harvey Kelly, managing director and global financial advisory services leader at AlixPartners, told Corporate Counsel magazine recently that when it comes to rooting out corruption, “no single procedure or step is bulletproof.”

A survey compiled by AlixPartners, Kelly says, shows that companies have deployed a variety of tactics to forestall an FCPA problem. Many companies responding to the survey reported that internal audits, employee training and greater oversight of records or internal controls were the most effective ways to reduce FCPA issues.

Companies that are too small to initiate a large, formal compliance program should nevertheless alert their employees and contractors in a formal way, should look for obvious signs or “red flags” of possible foreign bribery problems, and should have a plan in place for investigating and dealing with problems. Finally, they should be careful to maintain records that will help them prove, should they need to, that they do not tolerate corruption, and that they have taken reasonable steps to prevent it.

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