SHANGHAI/WASHINGTON (Reuters) – A U.S. anti-bribery probe into GlaxoSmithKline Plc touched on the firm’s Chinese consumer healthcare business in 2012, internal documents show, suggesting the drugmaker’s compliance problems in China could go wider than previously revealed.
GSK confirmed it had conducted an investigation into procurement practices in consumer healthcare in China, but said it did not find any “unethical conduct”. It said the inquiry was unrelated to a Chinese criminal investigation into corruption in its pharmaceuticals division that was made public last year.
Three “preservation notices” seen by Reuters show GSK was conducting a focused investigation into specific people and suppliers in China at least as far back as 2012.
The investigation was related to a U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) inquiry into possible violations of the anti-bribery Foreign Corrupt Practices Act (FCPA).
“The preservation notices issued in 2012 relate to allegations around adherence to procurement policies within our Chinese consumer healthcare business,” said Simon Steel, British-based spokesman for GSK, in a statement.
“We investigated using resources inside and outside the company and did not find evidence of unethical conduct, but did identify some non-compliance with our procurement procedures and remedial action was taken as a result.”
GSK has previously flagged that it has been part of a wider global investigation by the DOJ and SEC into pharmaceutical corruption, including in China, since 2010, but few details of the scope of that investigation have been disclosed.
The documents do not amount to evidence of wrongdoing by GSK or its partners, but show scrutiny falling on a part of its China business that had not previously been identified as under the spotlight.
Legal experts said that the more far-reaching the U.S. probe, the greater the risk to GSK that it could ultimately face a multi-million dollar settlement payment or fine.
GSK’s consumer healthcare segment, which spans products from Panadol painkillers to its Horlicks nutritional malted milk drink, raked in 5.2 billion pounds ($8.6 billion) last year, making up one-fifth of the firm’s global turnover.
The drugmaker is also facing bribery allegations in Syria, Iraq, Jordan, Lebanon and Poland. Chinese police have separately proposed corruption charges against GSK executives after alleging widespread bribery at the firm in July last year.
THREE NOTICES
The preservation notices seen by Reuters said they related to U.S. investigations under the FCPA. The FCPA specifically targets illegal payments to foreign government officials used to boost sales.
In FCPA investigations abroad, it is common for the company involved to take the lead in the on-the-ground investigation and report back its findings to U.S. investigators.
The three notices, which are sent by in-house counsel to employees to ensure papers are not destroyed during a probe, were emailed to senior GSK China staff, according to a person with direct knowledge of the investigation. [eap_ad_1] The person, speaking on condition of anonymity, said even some senior staff working on compliance in China had been surprised at how far the investigation had gone.
“The notices didn’t just generally ask about GSK’s processes, but listed specific named suppliers,” the source said. GSK declined to comment on this matter.
In one notice, dated Oct. 3, 2012, GSK asked staff to save documents related to certain employees in China, Chinese and U.S.-linked firms, senior Chinese academics and education institutes, particularly those concerning contracts, negotiations and payments.
Sources familiar with the situation said GSK had since cut ties with some of the suppliers identified.
A Shanghai-based corruption lawyer said the focused nature of the U.S.-linked probe even back in 2012 suggested GSK would find it tough to escape sanction.
“As well as other conditions they will need to agree, a large fine is going to be a must,” said the lawyer, who asked not to be identified because he is involved in similar cases.
The DOJ and SEC declined to comment on the documents, citing the ongoing nature of the investigation.
WIDESPREAD ALLEGATIONS
Allegations of a widespread network of bribery in China to promote sales surfaced last year against GSK, which now faces corruption probes by British, U.S. and Chinese investigators.
Chinese authorities have laid charges against three GSK executives over allegations the firm funnelled up to 3 billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials.