Avon 2011 Annual Report Download - page 100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Department of Justice to advise both agencies of our internal investigation. We are continuing to cooperate with both agencies and inquiries
by them, including but not limited to, signing tolling agreements, translating and producing documents and assisting with interviews.
As previously reported in July 2009, in connection with the internal investigation, we commenced compliance reviews regarding the FCPA
and related U.S. and foreign laws in additional countries in order to evaluate our compliance efforts. We are conducting these compliance
reviews in a number of other countries selected to represent each of the Company’s international geographic segments. The internal
investigation and compliance reviews are focused on reviewing certain expenses and books and records processes, including, but not limited
to, travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and acquisitions, and
payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and
their employees. The internal investigation and compliance reviews of these matters are ongoing, and we continue to cooperate with both
agencies with respect to these matters. In connection with the internal investigation and compliance reviews, we continue to enhance our
ethics and compliance program, including our policies and procedures, FCPA compliance-related training, FCPA third party due diligence
program and other compliance-related resources.
On October 26, 2011, the Company received a subpoena from the SEC requesting documents and information in connection with a
Regulation FD investigation of the Company’s contacts and communications with certain financial analysts and other representatives of the
financial community during 2010 and 2011. The Company was also advised that a formal order of investigation was issued by the SEC
relating to the FCPA matters described above and the Regulation FD matters that are referenced in the subpoena. The Company intends to
cooperate fully with the SEC’s investigation. We also have commenced an internal investigation, which is being conducted by outside
counsel under the oversight of our Audit Committee, in connection with the Regulation FD matters.
In connection with the ongoing internal investigations and compliance reviews described above, certain personnel actions have been taken
and additional personnel actions may be taken in the future. At this point we are unable to predict the duration, scope, developments in,
results of, or consequences of the internal investigations and compliance reviews and government’s investigation. In light of the fact that,
among other things, the internal investigations and compliance reviews are ongoing, we are unable to make an estimate of the amount or
range of loss that it is reasonably possible that we could incur from an unfavorable outcome.
Beginning in July and August 2010, several derivative actions were filed against certain present or former officers and/or directors of the
Company. Two of these actions were filed in state court (Carol J. Parker, derivatively on behalf of Avon Products, Inc. v. W. Don Cornwell, et
al. and Avon Products, Inc. as nominal defendant (filed in the New York Supreme Court, Nassau County, Index No. 600570/2010) and Lynne
Schwartz, derivatively on behalf of Avon Products, Inc. v. Andrea Jung et al. and Avon Products, Inc. as nominal defendant (filed in the New
York Supreme Court, New York County, Index No. 651304/2010)). These actions allege breach of fiduciary duty, abuse of control, waste of
corporate assets, and, in one complaint, unjust enrichment, relating to the Company’s compliance with the FCPA, including the adequacy of
the Company’s internal controls. The relief sought in one or both of these derivative complaints includes certain declaratory and equitable
relief, restitution, damages, exemplary damages and interest. We are unable to predict the outcome of these matters. Three federal court
derivative actions were also filed and then consolidated (Murray C. White, derivatively on behalf of Avon Products, Inc. v. Andrea Jung, et al.
and Avon Products, Inc. as nominal defendant (filed in the United States District Court for the Southern District of New York, 10-CV-5560);
County of York Employees Retirement Plan, derivatively on behalf of Avon Products, Inc. v. W. Don Cornwell, et al. and Avon Products, Inc.
as nominal defendant (originally filed in the New York Supreme Court, New York County, Index No. 651065/2010 and refiled in the United
States District Court for the Southern District of New York, 10-CIV-5933); and IBEW Local 1919 Pension Fund, derivatively on behalf of Avon
Products, Inc. v. W. Don Cornwell, et al. and Avon Products, Inc. as nominal defendant (filed in the United States District Court for the
Southern District of New York, 10-CIV-6256)). The amended consolidated shareholder derivative complaint alleged breach of fiduciary duty,
unjust enrichment and proxy disclosure violations (and sought rescission of compensation on account of such proxy violations), relating to
the Company’s compliance with the FCPA, including the adequacy of the Company’s internal controls. The relief sought included certain
declaratory and equitable relief, restitution and damages (including rescission). On February 14, 2012, on motion of plaintiffs, the court
dismissed these claims without prejudice.
On July 6, 2011, a purported shareholder’s class action complaint (City of Brockton Retirement System v. Avon Products, Inc., et al.,
No. 11-CIV-4665) was filed in the United States District Court for the Southern District of New York against certain present or former
officers and/or directors of the Company. The complaint is brought on behalf of a purported class consisting of all persons or entities who
either (1) were Avon shareholders as of the close of business on March 17, 2011, March 17, 2010, March 18, 2009, March 14, 2008, or