The original securities fraud lawsuit accused the cosmetics company of concealing its inability to stop workers from bribing officials in China to win business there; however, this week it won the dismissal.
U.S. District Judge Paul Gardephe in Manhattan presided over the case, clearing Avon and former Chief Executive Andrea Jung and former Chief Financial Strategy Officer Charles Cramb.
In his ruling he found no showing that they intended from 2006 to 2011 to deceive shareholders about the company's knowledge of alleged bribery, such as through corrupt ‘dinner and karaoke’ events, and dependence on bribes to boost sales.
In a 59-page decision, Gardephe also says Avon shareholders did not show the company intended to deceive them about its ability to comply with the federal Foreign Corrupt Practices Act, which prohibits bribing foreign officials.
Lawsuit
The lawsuit was brought on behalf of shareholders from July 31, 2006 to Oct. 26, 2011, and had claimed that Avon's corporate culture was ‘actively hostile’ to effective oversight. Gardephe said the plaintiffs may amend their complaint if they wish.
The original probe began in June of 2008, aimed at getting to the bottom of whether or not officials at the company had violated the Foreign Currency Practices Act – a law that makes it illegal for US businesses to bribe foreign officials.
This looked into alleged improper payments in China, which it has said cost the company $300 million.
In January 2012, Avon confirmed in an SEC filing that Cramb was fired following ongoing investigations into its China operations.
The company confirmed that the executive had been let go, with the filing underlining the fact that it was in connection with the investigations into possible material-disclosure violations that may have involved the bribery of officials in several countries.
In May this year, Avon announced a tentative agreement to pay $135 million to settle related probes by the U.S. Department of Justice and Securities and Exchange Commission.