Avon's calling crooked staff to account as smell of bribery grows

(AP)

For generations, the Avon Lady has been the very model of propriety, all smiles and soft sell as she hawks beauty products to friends, colleagues and neighbours. These days she is more likely to be a feisty soul in a Mexican market square or a young woman peddling from house to house in rural China than a throwback to the Fifties housewifery of the American suburb, but Avon's tradition of female salesmanship is as strong as ever after more than 100 years.

Which it is why it has been so shocking to learn that Avon Products and some of its senior employees are on the receiving end of a criminal bribery investigation that could land them with charges under US corruption laws.

Allegations first emerged from a whistleblower in China, who said government officials there were receiving lavish gifts from Avon employees who travelled with them, and while the company has prodded around for an internal investigation, it has found questionable practices far and wide, from Japan to India to Argentina.

And yesterday it emerged that federal prosecutors in Manhattan have questioned a number of former employees from the company's New York headquarters in recent weeks – and that they want to find and question even more former staff. The Justice Department, too, is on the case, looking into violations of the tough Foreign Corrupt Practices Act (FCPA), which imposes harsh penalties for US firms and citizens caught paying bribes overseas.

Avon was the brainchild of a door-to-door book salesman in New York called David McConnell, who in 1886 came up with the idea of handing out free perfume as an incentive when he called. The perfume quickly proved more popular than the books, and he hired Mrs Persis Foster Eames Albee to travel by horse and buggy and by train, under the title Mother of the California Perfume Company. It wouldn't be until 1939, after Mr McConnell fell in love with Stratford-upon-Avon on a trip to the UK, that the company would be renamed.

Today it is a $10bn annual business with around 6.5 million independent sales reps in over 100 countries. In the West, Avon focuses on selling its products online, through the social networks of young Avon Ladies. It has grown exponentially in emerging markets, particularly in Latin America. Andrea Jung, the Ivy League-educated marketing executive who has been chief executive since 1999, was hailed a hero when Avon became the first company to win a license to sell door-to-door in China in 2006.

After the latest allegations were published in The Wall Street Journal yesterday, an Avon spokesman said: "We don't comment on ongoing investigations." The company has, however, set out alarming details of its internal investigations in documents sent to its shareholders. In June 2008 it first revealed that travel, entertainment and other expenses in China might have been "improperly incurred".

Earlier this month it said that it had fired four executives as a result of its investigations: its global audit and security chief and three senior executives in China, including the general manager and chief financial officer there. And it emerged that questionable payments to officials running to millions of dollars had been uncovered in Argentina, Brazil, Mexico, India and Japan.

The cost of the internal investigation reached almost $100m last year and will be about the same again this year, Avon said – and the figure could go even higher if the federal authorities decide there is a case for prosecutions and fines under the FCPA.