Eye-Popping Legal Bills Addressed by New Avon General Counsel
By Douglas Gillison | April 3, 2013 5:52 pm

The newly installed general counsel at the embattled cosmetics company Avon Products Inc., Jeff Benjamin, said today that the legal costs of an internal foreign bribery probe were not due to the number of firms retained by the company.

The remarks, delivered in response to a question posed during his public interview at a compliance conference hosted in Washington, D.C., by Dow Jones & Company Inc., appeared intended to dampen interest in the five year-internal probe, which has become a spectacle among compliance practitioners due to its scope and soaring expenses.

Despite spending nearly $300 million in the last three years alone, according to a February disclosure, Avon has yet to reach a settlement with U.S. authorities, even though talks have been underway since at least as early as July.

Jeff Benjamin

“I think it’s public knowledge that we have lawyers from two firms assisting us,” said Benjamin. “More law firms doesn’t necessarily mean more lawyers working on a case.”

The comments came as Avon revealed Tuesday that it had spent $600,000 in audit-related fees after the Securities and Exchange Commission subpoenaed the accountancy PricewaterhouseCoopers LLP for records related to the bribery probe.

Avon is represented by Arnold & Porter LLP, where partner Claudius O. Sokenu has led the investigation. John W. White, a partner at Cravath, Swaine & Moore LLP, was retained in late 2012. White is the husband of former U.S. Attorney Mary Jo White, President Barack Obama’s nominee to head the SEC.

Benjamin, a former general counsel at the pharmaceutical company Novartis Corp. who came out of semi-retirement to join Avon in September, said he believed in having “the best people in the right roles rather than the best people that might be available at a specific law firm.”

He replaces former General Counsel Kim Rucker, who left to join Kraft Foods Inc. in July.

In the course of the probe, the company has lost its Chief Financial Officer Charles Cramb and its Group Vice President Kerry Car. CEO Andrea Jung stepped down last year but the company said this was unrelated to the probe.

Benjamin declined to be drawn when asked about progress toward a settlement with U.S. authorities, which has been under discussion for at least eight months, saying only that it was in the works.

“One thing I can say with great confidence is that every day brings us closer to a resolution,” he said.

He also said the company had recently conducted its first company-wide employee survey, asking workers whether they believed they had ever witnessed misconduct by their colleagues and if so, whether they had reported this.

“I just heard the other day that it’s the first time we’ve ever done it at Avon and we had a 60 percent response rate,” said Benjamin.

Benjamin said that since September Avon had invited WorldCom whistleblower Cynthia Cooper and the former prosecutor David B. Anders, who was involved in prosecuting securities fraud at WorldCom, to address the company. Avon has also staged role play exercises as part of the company’s compliance program, according to Benjamin.

“We did a parody on Meet the Press which we called Meet the Stress,” said Benjamin. “We asked people to identify the factors at World Com that contributed to the tragedy there and how many of those factors exist at Avon.”

Benjamin was followed at today’s events by Gerson Zweifach, who became general counsel at News Corp. in January last year as the company strove to respond to the phone hacking and bribery scandal in the U.K.

News Corp. is the parent company of both Dow Jones and The Wall Street Journal, which organized the conference. Main Justice was also a media partner for the event.

Zweifach, formerly of Williams & Connolly LLP, defended News Corp. Chairman Rupert Murdoch, who was deemed “not a fit person” to oversee a multi-national company by a judicial inquiry examining ethical practices in the British news media.

“I don’t buy that,” said Zweifach, describing the conclusion of the Leveson Inquiry as “a tightly fought political battle between members of that parliament.”

“It’s worth stepping back and looking at this.”

Williams & Connolly were hired to represent News Corp. in the phone hacking matter. Zweifach replaced former general counsel Lawrence A. Jacobs.

The company said in August it has recorded a $57 million charge for investigation costs. Scores of journalists and British officials have been arrested as part of a criminal probe.

Zweifach said the company’s phone hacking and bribery investigation had determined that these practices were not present in News Corp. companies outside of Britain.

“Here’s what it wasn’t, it’s not a culture. Empirically, we’ve looked all over the company,” he said. “Nothing like this happened except in the U.K.”

However, the hacking scandal is not the only foreign bribery concern for News Corp. The Wall Street Journal said last month that an internal investigation had cleared two of its reporters of bribery allegations in China last year.

Twentieth Century Fox, a News Corp. property, has reportedly been contacted by the SEC as part of an investigation into allegations that Hollywood movie studios have paid bribes in China.

Gerson Zweifach

The Journal also reported last year that the Federal Bureau of Investigation was examining allegations that a former subsidiary, News Outdoor Russia, had paid bribes in that country to approve the placements of billboards.

Zweifach, who also serves as chief compliance officer, said his mandate was to prevent any recurrence of the phone hacking scandal.

“I was really struck by the extent to which Rupert Murdoch, Chase Carey, senior managers, were abosolutely committed to doing whatever it took to not live through something like this again,” he said. Carey is News Corp.’s president and chief operating officer.

Zwerifach also defended News Corp.’s initial failure to disclose the scope of the phone hacking allegations, in which News Corp. employees have been accused of systematic bribery of public officials in the course of their reporting.

Les Hinton, an aide to Murdoch, told a parliamentary committee in 2007 that an internal investigation had found no evidence of widespread wrongdoing. However, British police reopened their investigations in 2010 after media reports indicated misconduct was in fact prevalent.

Zweifach said the company had initially thought it was reliably informed by police and its own internal investigators that the matter was confined to a small circle.

“You had an arrest where the police gathered up all of this critical evidence from the principal operator who was engaged in this activity, didn’t share it, didn’t tell us,” he said, in an apparent reference to the 2006 arrests of Clive Goodman, former royal affairs editor at the now-defunct News of the World tabloid, and the private investigator Glenn Mulcaire.

“Local lawyers, local managers looked into it, did their own review, decided the police were right,” said Zweifach.

The outcome was not ideal, Zweifach said, but “I get it, I understand why it was handled the way it was handled.”

Previous coverage by Just Anti-Corruption:

Friday, March 1, 201
Wednesday, August 8, 2012
Tuesday, December 4, 2012
Tuesday, May 29, 2012
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