In September 2015, Avon Products, Inc. reached a $62 million settlement in a class action brought by investors alleging securities fraud.  Specifically, the investors claimed that Avon intentionally mislead investors about the company’s compliance with the Foreign Corrupt Practices Act which, in turn, artificially inflated Avon’s stock price.

The class action followed Avon’s payment of $135 million in fines to the Securities and Exchange Commission and Department of Justice in December 2014 for violations of the FCPA including bribes paid to Chinese government officials.  With little work required of the class after the SEC and DOJ completed their investigation, similar lawsuits following FCPA violations are almost a certainty.

Significantly, Avon had anti-corruption compliance programs in place but failed to follow through with a full investigation when initial internal reports uncovered potential violations.  This opened Avon up not only to Government prosecution, but teed up the derivative suit because those in charge were aware of potential violations but not make them known to investors or the general public.

While in the past establishing anti-corruption policies may have been sufficient to insulate an entity from certain FCPA violations.  Avon’s liability to both the Government and to its shareholders demonstrates that anti-corruption practices must remain effective and fully implemented if they are to offer any protection to the corporation.   U.S. corporations must be sure that their FCPA compliance programs are up-to-date, effectively disseminated to branches and subsidiaries, and, perhaps most importantly, expressly followed when issues arise.