China-Fraud Sleuth Jailed For GSK Pharma Ties

The Wall Street Journal reports that Shanghai police have detained British national, Peter Humphrey, a “well-known China-fraud investigator” whose clients include pharmaceutical firm GlaxoSmithKline (GSK). GSK is currently under investigation in China for bribery and other charges but says that is “cooperating with the Chinese investigation”:

Mr. Humphrey’s detention has caused concern among investigation firms working in China. “He is one of the last real investigators,” said Frank Casey, a Florida-based forensic accountant who has partnered with Mr. Humphrey over the years.

Speaking over the weekend, executives at other due-diligence firms said Beijing is growing less tolerant of their activity. Still, some said there is little to indicate Mr. Humphrey’s troubles signal a broader crackdown on their industry.

“There’s been a tightening” of access to the kinds of information needed to conduct fraud investigations and carry out due diligence, the China chief of one firm said Saturday.[Source]

Details of the arrest on July 10 were not known”, according to The South China Morning Post.  The SCMP reports that Humphrey’s investigative firm, ChinaWhys, also failed to respond to phone calls or e-mails:

It was unclear whether he had been charged or had retained a lawyer, Dow Jones reported.

ChinaWhys’ Shanghai office did not respond to phone calls and e-mails from the South China Morning Post.

According to the company website, ChinaWhys “provides creative approaches to critical business problems in China”.

Humphrey has spent 27 years involved with China and Eastern European countries. He has been involved with risk management and detective services since the late 1990s after spending two decades as a foreign correspondent with Reuters in Asia, Eastern Europe and the Balkans, according to the information on ChinaWhys website. [Source]

Reuters adds that GlaxoSmithKline may face serious charges from China, the US, and Britain due to allegations of  corruption by the Chinese government:

Britain’s biggest drugmaker, which has described the allegations as “shameful”, has already hired Ernst & Young to conduct an independent review of its systems in China and sent three senior executives to lead the response on the ground.

A company spokesman said it was also keeping all relevant regulators updated as appropriate. The charges from China could expose GSK to prosecution under Britain’s Bribery Act and the U.S. Foreign Corrupt Practices Act.

GSK declined to comment further ahead of the second-quarter results, which are due at 1100 GMT on July 24.[Source]