Avon 2010 Annual Report Download - page 105

In October 2010, the 2002 assessment was upheld at the first administrative level at an amount reduced to $37 from $83 including penalties
and accruing interest at the exchange rate on December 31, 2010. We have appealed this decision to the second administrative level.
In the event that the 2004 or 2002 assessment is upheld at the third and last administrative level, it may be necessary for us to provide
security to pursue further appeals, which, depending on the circumstances, may result in a charge to income. It is not possible to make a
reasonable estimate of the amount or range of expense that could result from an unfavorable outcome in respect of these or any additional
assessments that may be issued for subsequent periods.
As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on
compliance with the Foreign Corrupt Practices Act (“FCPA”) and related U.S. and foreign laws in China and additional countries. The
internal investigation, which is being conducted under the oversight of our Audit Committee, began in June 2008. As we reported in
October 2008, we voluntarily contacted the United States Securities and Exchange Commission and the United States 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 four other 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. At this point we are unable to predict the duration, scope, developments in,
results of, or consequences of the internal investigation and compliance reviews.
Beginning in July and August 2010, several derivative actions were filed against certain present or former officers and/or directors of the
Company that allege breach of fiduciary duty, and, in certain complaints, abuse of control, waste of corporate assets, unjust enrichment
and/or proxy disclosure violations, relating to the Company’s compliance with the FCPA. The relief sought in one or more of the derivative
complaints includes certain declaratory and equitable relief, restitution, unspecified damages, exemplary damages and interest. The
Company is named as a nominal defendant. These actions include 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); 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 now refiled in the United States District
Court for the Southern District of New York, 10-CIV-5933); 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); 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). We are unable to predict the
outcome of these matters.
Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or
threatened against Avon. In management’s opinion, based on its review of the information available at this time, the total cost of resolving
such other contingencies at December 31, 2010, should not have a material adverse effect on our consolidated financial position, results of
operations or cash flows.
NOTE 17. Goodwill and Intangible Assets
In July 2010, we acquired substantially all the assets and liabilities of Silpada Designs, Inc. (“Silpada”), for approximately $650 in cash, plus a
potential additional payment in early 2015 based on the achievement of earnings growth of the Silpada North America business during the
periods between 2012 through 2014. Silpada is included within our North America segment. At the date of the acquisition, a liability of
approximately $26 was recorded associated with this potential additional consideration (“contingent consideration”), based on a valuation
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