The world's leading direct seller of beauty merchandise, Avon Products, Inc. has been fined US$135 million after its China subsidiary pleaded guilty to bribery charges on Wednesday.

Avon's China branch entered the plea in Manhattan's federal court, acknowledging that it had falsely recorded disbursements of up to US$8 million from 2004 to 2008 for the facilitation of its direct selling license, which had been the first business to obtain such license on March 2006.

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China had prohibited direct selling in 1998 but decided to lift the ban in 2001.

The U.S. Securities and Exchange Commission (SEC) found that the disbursements had been logged either as regular business expenses or reimbursements to third-party suppliers. In some cases, the payments were recorded with very minimal details.

Avon China had reportedly showered Chinese officials overseeing direct selling regulations with gifts, such as Louis Vuitton, Gucci and Tiffany merchandise, and paid travel within China or to Europe or the U.S.

Aside from gaining access to Chinese direct selling regulators, such gifts were intended to "avoid fines" and control any negative publicity that could tarnish "Avon's clean, corporate image" which was necessary for its license application.

Avon's China subsidiary had gained "substantial financial benefits" from the millions it paid to government officials, said SEC Division of Enforcement associate director Scott W. Friestad.

For its role in violating the U.S. Foreign Corrupt Practices Act, the Manhattan-based direct selling giant has been penalized US$68 million in criminal charges and almost the same amount for prejudgment and disgorgement interest for settling a civil case with the SEC.

The prosecution said the settlement was made with Avon's cooperation in the investigation in mind, including making available all U.S.- and foreign-based employees for interviews and its comprehensive anti-corruption reform initiatives.

For its part, the beauty company said that the penalty was "in line with the expected terms" it had previously reported.

TagsAvon Products Inc, Bribery in China, Government corruption, Direct selling license, U.S. Securities and Exchange Commission, U.S. Foreign Corrupt Practices Act