fraud analysis paper

  1. describe and analyze how the fraud was executed;
  2. identify and briefly discuss the role of the parties that were involved as perpetrators, accomplices, victims, tipsters, observers, and so forth (preferably in a chart or illustration) [include Jeffry Picower];
  3. assess the motives (or possible motives, if not reported) of each perpetrator;
  4. identify controls that might have deterred or prevented the fraud from occurring;
  5. discuss any involvement of the SEC;
  6. document how the fraud was discovered and investigated, including what should have been identified as red flags;
  7. discuss the resolution of this case; and
  8. cite and reference any articles, other texts, journals, websites, or so forth that you used as a source for the facts in your paper. NOTE: Avoid Wikipedia, because it is not recognized as a credible, authoritative source.

The SEC versus Avon Products, Inc. case was a result of the company violating the Foreign Corrupt Practices Act (FCPA) by failing to have proper internal control in place that would have prevented and detected the 8 million dollar payments and gifts that were made to the Chinese government by way of one of Avon Products’ subsidiaries located in China; known as the Guangzhou Office. The investigation was conducted by Pual Sharratt and Roger Paszamant and supervised by David Frohlich; however, it was because of a whistleblower within the company that it was brought to the attention of upper level management. The investigation revealed that Avon violated Section 13(b) (2) (A) and 13 (b) (2) (B) of the Securities and Exchange Act of 1934. It was concluded with a $135 million dollar settlement paid to the Southern District of New York.

According to the press release from the SEC, Avon’s subsidiary allegedly made cash, travel, gift, and entertainment payments to Chinese government officials in order to obtain a direct selling license so that Chinese officials could oversee the direct selling regulations. This took place approximately from 2004 to 2008; however due to their accounting inaccuracies, these blatant operations may have been transpiring longer. In March 2006, these favours resulted in Avon becoming the first company to receive the first direct selling business license in China. In addition to the bribery committed, the company failed to properly account for the details and purpose of the payments being made to the Chinese government by erroneously recording the transactions with no information at all or as employee business expenses.

For this act to transpire, according to the fraud triangle, there must have been a perceived pressure, a perceived opportunity and then rationalization to concede their deeds. There were a eight individuals; two senior executive employees of the Guangzhou office known as Avon Products (China), three senior executive employees who were from America, two executive attorneys, and one of their internal auditors. China recently lifted their outlawed direct selling laws when they joined the World Trade Organisation which was an exceedingly important opportunity for any international company who needed to export out of China, this type of pressure to obtain a direct selling license out of China may have been the pressure that commenced the fraud. In providing over eight million dollars of gifts in cash, meals, entertainment, designer bags snd even non business travel which were maliciously

Since Avon maintained and issued publicly traded securities , they had to abide by Section 12(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78) ehich required them to file periodic reports with the SEC

Avon has since been conduction internal control audits and had to report their compliance efforts for an eighteen-month period.  They also, were permanently enjoined from violating the provisions of the federal securities laws.

Works Cited

SEC Press Release “SEC Charges Avon With FCPA Violation”. (2014, December 17). Retrieved July 17, 2015, from

SEC Litigation Complaint. (2014, December 17). Retrieved July 17, 2015,

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