In early 2005, Avery managers in China were instructed to get Dong, the institute employee, off the payroll within a week. Avery paid him about $10,000 to leave, said a former manager who was involved in the matter. Dong, reached by phone, said the amount was a little less, but he declined to comment further.
Three months later, two of Avery's senior managers in Hong Kong, including the Asia-Pacific head of reflective materials, were removed, as was the division's finance director in Shanghai.
With Ding gone, Avery's arrangement to supply reflective materials for police vehicles ended. The same materials that Avery sold for $62 per square meter eventually went for as little as $12, according to Avery salespeople and competitors.
Driving ambitions
In building relations and cutting deals with Chinese officials, local employees said, they took their cues from management in Pasadena, which wanted to rapidly expand in China, retaining high-level consulting help and spending extensively on entertainment. And, Ding argued, entertaining was a big part of courting customers in China.
"You cannot just do PowerPoint presentations," he said.
After Avery reported possible FCPA violations, few employees could recall any more costly dinners, and the company has since stepped up its monitoring of and training in ethics standards in China. Included are workshops, regular e-mails and a wallet-size laminated card with a code of conduct and the number of an international hotline printed in English and Chinese.
James Durree, Avery's vice president in charge of business ethics, downplayed the problems in China.
"It is common in China to do business based on relationships," he said at the company's offices in Pasadena. "That's fine, but we want it to be disclosed." Durree stressed that China wasn't a special case.
The troubles didn't completely go away. In the summer of 2007, it ordered three employees at its reflective-materials unit to stop work because of ethics concerns, according to a copy of a letter Avery sent them.
Peter Zhu, 48, said investigators kept asking him about a seminar he helped arrange in 2005 at a luxury hotel. Avery paid for the three-night stay and meals for two dozen guests, including four officials of state enterprises, Zhu said, adding that his bosses at Avery had approved the outing and guest list but later used the event against him.
Exasperated by constant pressure, Zhu said, he agreed to leave the company last fall after Avery paid him the rest of his contract, plus two months' extra salary, a total of about $40,000. He said Avery did not cite any evidence of improper behavior.
Johnson Jiao, 44, held on to his job until May. Now employed at a new company in a similar industry, Jiao looks back bitterly at his three years with Avery.
"All my values were blurred," he said. "I didn't know what was right or wrong."
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don.lee@latimes.com
