China Reveals Of GlaxoSmithKline Bribery Probe, Alleging Company Acted Like "Godfather" Of Criminal Orgainization

   on July 15 2013 3:51 AM

Chinese investigators, on Monday, said British pharmaceutical major GlaxoSmithKline plc (NYSE:GSK), or GSK, bribed Chinese officials, medical associations and doctors, through travel agencies for six years to boost its drug sales in China.

Giving details about their probe on GSK, authorities said the company's executives were involved in widespread bribery in the country, and that the company had funneled about 3 billion yuan ($489 million) to more than 700 travel consultancies and agencies since 2007.

"We have sufficient reason to suspect that these transfers were conducted illegally," said Gao Feng, head of the economic crimes investigation unit at the Ministry of Public Security, according to a Reuters report. "You could say the travel agencies and GSK were criminal partners."

Gao said that four senior Chinese executives have been detained as part of the bribery investigation, and noted that Mark Reilly, head of GSK’s China business and a British citizen, left the country on June 27 and has not returned.

The police authorities said that GSK also raised fake invoices and committed unspecified tax violations. GSK's total investments in China exceed $500 million, according to the company's website.

On July 11, the Ministry of Public Security said GSK executives had confessed to bribery and tax violations. The police reportedly had detained GSK’s employees in three Chinese cities where the pharmaceutical giant runs its China operations.

According to the Brentford, U.K.-based health care major, it is investigating fresh allegations that its employees in China employed unfair trade practices, including bribing local doctors, to sell Botox in the country. The company had earlier said that its internal probe did not find evidence for widespread wrongdoing in China, but the company added that it is cooperating with Chinese authorities on the probe.

However, Chinese authorities said they have not received any information from the company’s UK headquarters. Authorities did not elaborate on how the money was transferred to the doctors, but said that GSK was responsible for the illegal trade practice.

"We could not find the evidence [of corruption] in their accounts. They used travel agents as a money platform. But I must make it clear that among these partners, GSK is the main party responsible. It is like a criminal organization, there is always a boss. In this game, GSK is the godfather," Gao said, the Telegraph reported. "To win GSK's favor some agencies not only offered money, but also sexual favors."

He also added that more foreign companies could be involved in similar rackets.

"Frankly speaking, from our investigation we have also found some clues of illegal money transfers involving other foreign companies. Whether they have been involved in these allegations we are not so sure now. Probably you better ask them yourself,” he told reporters at the press conference.

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