UPDATE 2-Avon says probing China operations
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NEW YORK, Oct 20 (Reuters) - Avon Products Inc (AVP.N), the world's largest direct seller of cosmetics, said on Monday it was investigating its China operations over an allegation that certain travel, entertainment and other expenses may have been improperly incurred.
Avon said the voluntary internal investigation is focused on compliance with the Foreign Corrupt Practices Act. Under the U.S. law, it is illegal for U.S. companies or their agents to use bribery to win business in foreign countries.
Avon is investigating an allegation that there were improper expenses incurred on behalf of a government official in China, Avon spokeswoman Renee Johansen said.
She declined to give further details about the allegation, including the rank of the official and the exact nature of the expenses.
The internal investigation comes after Avon won approval in 2006 to return to its favored direct-selling model in China.
Avon uses legions of representatives to sell to customers at home rather than moving its products through stores.
But in 1998, Beijing shut the door on direct sales in a blanket ban aimed at curtailing domestic pyramid schemes, forcing Avon to begin selling its products through beauty boutiques.
Avon said it had informed both the U.S. Securities and Exchange Commission and the U.S. Department of Justice about the probe that began in June and remained in its early stages.
Avon said in July its revenue in China grew 20 percent in the second quarter, but the region reported an operating loss of $8 million, up from a loss of $2 million in the year ago period.
In recent years, U.S. government officials have set their sights on probing companies for possible violations of bribery laws.
Last month, Albert "Jack" Stanley, a former KBR Inc (KBR.N) chief executive officer, pleaded guilty to charges involving a scheme to pay $180 million in bribes to Nigerian government officials to win work on a $6 billion liquefied natural gas plant. (Editing by Andre Grenon, Leslie Gevirtz)
