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Robert Trigaux

Will Avon's bribery probe touch its ex-prez, Outback Steakhouse parent CEO Liz Smith?



Lizsmithceoosirestaurantpartners Wake up and good morning. Liz Smith, CEO of Outback Steakhouse parent OSI Restaurant Partners in Tampa, hits her five month anniversary tomorrow in her new casual dining gig. Is that enough time to insulate her from any blowback from the growing overseas bribery scandal and internal investigation at her former company, cosmetics giant Avon Products?

It's not as if the hint of bribes in China are brand new. Avon began investigating its China operations in 2008 after it received an allegation that some travel, entertainment and other expenses may have been improper, according to filings with the Securities and Exchange Commission. Avon recently confirmed it has put multiple executives on leave, including the general manager of Avon China, the former finance head for Avon in China and most recently an executive in Malaysia, and the company's vice president of finance and tax.

Here's the curve ball. The Wall Street Journal reported Monday that Avon had suspended those executives, pending the outcome of the investigation. But the newspaper also cited a source indicating Avon's probe has spread from China to include a dozen or more other countries.

If that's true, it raises some red flags that the bribery issue was not restricted to a single Avon management team in one country but to something that may have gone awry inside the broader corporation.

Andreajungceoavon To be clear: News reports say longtime Avon CEO Andrea Jung (photo, right) isn't a focus of the inquiry. Nor is OSI's Smith, who served as Avon president. Part of Smith's job description, notably, was her role in leading Avon's "global marketing, supply chain, information technology and global sales business units."

According to the JournalAvon has been investigating since June 2008 -- nearly a year and a half before Smith departed Avon -- whether certain travel, entertainment and other expenses in China might have been improperly incurred. The investigation has since expanded to more countries, including in Latin America, the Journal reports citing "a person familiar with the matter," where the company garners the bulk of its sales and profits. The scale of the alleged bribery, initially involving several million dollars, has grown as well, the Journal says. Here's the original Wall Street Journal story and a follow-up about the spread of the probe.

Avon's investigation focuses on employees' compliance with the U.S. Foreign Corrupt Practices Act, which makes it illegal to bribe foreign officials. Avon has not directly commented on the bribery probe but here's the company's position on corporate responsibility.

Bribery allegations against corporations are hardly new. In the strange bedfellows world, Outback Steakhouse executives four years ago said its South Korean subsidiary might have bribed government officials. Subsidiary executives were replaced. No other federal action was ever taken against the company.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:27am]


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