British Pharmaceutical Giant GlaxoSmithKline (GSK) Staff Held In Beijing, Shanghai and Changsha Amid Corruption Investigation

 @MalikFromLA
on July 01 2013 2:34 PM
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GlaxoSmithKline's logo is pictured on the company's headquarters building in west London, July 21, 2008. Reuters / Toby Melville

China is detaining employees of Britain's GlaxoSmithKline PLC (LON:GSK) in three Chinese cities where the pharmaceutical giant runs its China operations as part of a corruption investigation, a city official in Changsha told reporters Monday.

An undisclosed number of employees were detained Friday and also in Beijing and Shanghai as public security officials launched an investigation into possible economic crimes.

GlaxoSmithKline, which has more than $500 million of investments in China, said it is cooperating with the police inquiry.

"We are aware of an ongoing investigation by China government authorities," GlaxoSmithKline's U.S. external communications director, Mary Anne Rhyne, told International Business Times in an email. "But at this stage, it is still unclear what the precise nature of the investigation is."

In June the company launched its own investigation into allegations from an anonymous tipster that its sales staff in China had been involved in widespread bribery of doctors to prescribe drugs from 2004 to 2010.

A company spokesman in London said on June 11 that GlaxoSmithKline fired its China head of research and development, Zang Jiangwu, after discovering that a scientific paper co-authored by Zang contained fake data. Three other employees were reportedly put on leave and another employee resigned.

GlaxoSmithKline has also said that it advances cash to its China employees for expenses because credit card payments aren't always possible in many locations and it routinely audits such payments, according to the Wall Street Journal.

Yet on Monday it announced that it had thoroughly investigated the accusations made by the whistle-blower and concluded that despite the fake data situation that it handled swiftly, it found no evidence of bribery or corruption in its Chinese operations.

GlaxoSmithKline has been under an open investigation since 2010 by the U.S. Justice Department and the SEC for possible violations of the U.S. Foreign Corrupt Practices Act in China. In a regulatory filing last year, the company said the matter is continuing.

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