Amway, Canada Reach Settlement In Customs Dispute

Wall Street Journal/September 25, 1989
By John Urguhart

Ottawa -- Amway Corp. has paid the Canadian government $45 million Canadian (US$38 million) to settle a decade-old customs dispute.

The out-of-courtsettlement amounts to 40% of the Canadian government's C$113 million claim against the direct sales company for duties and penalties owed as a result of customs evasion in the 1970s.

Amway pleaded guilty to defrauding Canadian Customs in a separate 1983 criminal prosecution. But the government had to undertake a civil action to collect the duties and penalties that the government claimed were owed.

The government decided to accept the out-of-court settlement to save the time and expense of a civil action that could have dragged on indefinitely, said a spokesman for Revenue Canada (the federal revenue department).

Government officials also said they weren't certain that even if the claim were upheld by the Federal Court that they would be able to collect the full amount. Amway officials had said the company's "maximum exposure" in Canada, based on the value of Amway's Canadian properties, was C$6 million.

At Amway's headquarters in Ada, Michigan, a spokeswoman said the company is "pleased" with the settlement. She said that under the arrangement, Amway is prohibited from commenting on the settlement's terms and conditions.

The case has been a public-relations, as well as a financial headache for Amway. When Amway made a short-lived bid in May for Avon Products Inc., opponents of the offer cited the Canadian dispute in efforts to discredit the company.

The settlement was the largest ever made in a Canadian customs case, a Revenue Canada official said. The Canadian government spokesman said Amway made the C$45 million payment Sept. 15.

In the 1983 criminal action against Amway, the company paid a C$25 million fine after pleading guilty to defrauding the government by declaring false values for goods imported into Canada over 15 years.

When the out-of-court settlement was reached in the civil action, the case was still in its pre-trial examination for discovery stage. Amway had fought, mostly unsuccessfully through the courts, to prevent having to provide various documents and witnesses to the pre-trial hearing. Canadian officials said Amway made the proposal for the settlement.

Amway, founded in 1959, is owned by the families of Jay Van Andel, chairman, and Richard DeVos, president. For the year ended Aug. 31, sales were about US$1.9 billion. Amway doesn't disclose earnings.