China increases bribery claims heat on GSK

Whatapp News

By Jamil Anderlini in Beijing and Andrew Jack and George Parker in London

China accused GlaxoSmithKline of earning billions of renminbi in “illegal revenues” through a programme of “massive and systemic bribery” as it ratcheted up the pressure on the pharmaceuticals group following a 10-month long corruption investigation.

Police at the Ministry of Public Security yesterday said 46 suspects at GSK’s Chinese subsidiary had been identified as part of a “complete bribery chain” that funnelled money to hospitals, doctors and government officials between 2009 and 2012. Mark Reilly, a Briton who was head of the unit, ordered subordinates to offer the illegal payments, they said.

The allegations will almost certainly lead to charges, which could strain China’s relations with Britain. David Cameron, UK prime minister, had sought to limit any damage to the London-based company.

Regulators in the US and UK are closely monitoring events in China and could launch their own investigations, although legal experts said they were likely to wait for Beijing to complete its probe first.

A senior official at the Chinese ministry’s economic crime investigation bureau said “all departments” of GSK’s China subsidiary were “fully engaged” in the alleged bribery.

The company paid for the bribes by inflating the price of medicines in China, some of which were seven times more expensive than in other markets, the official said.

According to the official, the company set up several internal units with code names such as “operation Great Wall” and “operation soaring dragon” to pay the bribes.

The developments will send a chill through the international business community. So far very few expatriates have faced corruption charges.

GSK has previously denied any systemic corruption. In a statement yesterday it said: “We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK.”

Mr Cameron raised the investigation with Premier Li Keqiang last December on a visit to Beijing, after which he described GSK as a “very decent and strong British business that is a long-term investor in China”.

Downing Street said that during his talks with Mr Li, Mr Cameron wanted to “underline the importance he attaches to the bilateral commercial relationship between the UK and China”.

Mr Reilly has not been arrested and remains in China, which he is not allowed to leave, according to people familiar with the matter. He could not be reached for comment. (FT)

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