Report: Grand Jury Hears Evidence in Avon Bribery Case

A foreign-bribery probe by U.S. officials against Avon Products (NYSE:AVP) has intensified as prosecutors reportedly presented evidence to a grand jury.

According to The Wall Street Journal, the investigation is zeroing in on a 2005 internal audit report that concluded Avon employees in China may have been bribing officials in violation of the Foreign Corrupt Practices Act.

New York-based Avon declined a request for comment, but the beauty company told the Journal it is not “aware that a federal grand jury is investigating this” and declined to confirm the existence of a 2005 audit. Avon has previously said it didn’t become aware of bribery allegations until 2008.

The 2005 internal audit discovered hundreds of thousands of dollars in shady handouts to Chinese officials and third-party consultants as Avon sought to receive a license to conduct door-to-door sales in the Asian giant, the paper reported.

As part of the bribery probe, the FBI and U.S. prosecutors are examining whether or not current or former execs ignored the audit’s findings or sought to cover up the problem, the Journal said. Execs at Avon’s headquarters who saw the report didn’t reveal its contents to the board of directors, audit committee or finance committee, the paper reported.

The bribery probe has cast a shadow over Avon and helped lead to the December announcement that CEO Andrea Jung plans to step down.

According to the New York Post, Avon’s CEO search has narrowed to a trio of candidates, including Mindy Grossman, head of HSN’s (NASDAQ:HSNI) Home Shopping Network and former Wal-Mart (NYSE:WMT) exec Brian Cornell. The paper said the third candidate may be former Sara Lee (NYSE:SLH) exec C.J. Fraleigh.

Shares of Avon, which have tumbled about 40% over the past year, slipped 0.78% to $17.73 Monday morning.