American Detained as GSK Scandal Widens (Updated)

The scandal surrounding British pharmaceutical firm GlaxoSmithKline (GSK) in China has widened as a previously unnamed American citizen who has been detained has been identified as Yu Yingzheng, the wife and business partner of fraud investigator Peter Humphrey, who has also been detained. While the couple has worked with GSK in the past, it is not yet clear if or how their detentions are related to the current investigation. From Reuters:

The sources said Yu Yingzeng, general manager at the ChinaWhys business risk advisory firm, and her husband Peter Humphrey, the company’s managing director, were detained by Chinese authorities in Shanghai on July 10.

It is unclear if the detention of the couple is directly related to a Chinese police investigation into bribery allegations against British drug maker GlaxoSmithKline.

ChinaWhys has done work with drugs companies, including GSK, separate sources familiar with the matter have said.

It was not clear if either Yu or Humphrey had any legal representation. [Source]

According to the Financial Times, the couple has a teenage son:

Following the couple’s detention, the British government has been providing consular services to their teenage son. Friends of the couple say they have not been able to reach either of them by phone or email for almost two weeks. [Source]

The investigation into GSK’s actions in China has revealed an alleged network of corruption which involved hundreds of millions in bribes to government officials, doctors, hospitals, and travel agencies. CNN has provided “an overview of the probe, the parties involved and the potential penalties,” while the Telegraph has posted a timeline and a Q&A about the crisis. State media has also hinted that the investigation may spread to other pharmaceutical firms operating in China as part of a crackdown on corruption in the healthcare industry.

Officials at GSK headquarters in the U.K. have admitted that China executives may have broken Chinese law and have tried to distance themselves from their China operation. In a recent conference call with reporters, CEO Andrew Witty addressed the allegations but was criticized for providing only vague answers. From the Guardian:

What have GSK staff actually done?

“It [the Chinese investigation] appears to be focused on a number of senior managers, potentially defrauding GSK and doing something inappropriate and illegal.”

He said the allegations were “shameful” and “deeply disappointing”. “To be crystal clear we have zero tolerance to this sort of behaviour,” he said.

But he refused to explain what exactly the executives have been doing. He said the investigation was in the early stages, and he was unable to provide any further details.

[…] How far up the corporate food chain did the corruption reach?

Witty said the Chinese police’s investigation appeared to focus on the four Chinese GSK executives already detained, and he said there was nothing to indicate that GSK China’s British management – Mark Reilly and Steve Nechelput – had any knowledge of the wrongdoings. [Source]

– Update (12:45 pm PST): GSK announced that it has replaced the head of its China operations in the wake of the scandal. Reuters reports:

Herve Gisserot, senior vice president for Europe, will take over as general manager from Mark Reilly, who will remain with the company as a senior member of the management team, a spokesman said on Thursday.

Reilly, currently in Britain, will continue to help lead GSK’s response to the Chinese government’s bribery investigation – but the spokesman declined to say whether he would travel back to China.

Reilly has been working at GSK’s headquarters on the outskirts of London since arriving from China in early July for what people familiar with the situation said at the time were routine meetings.

“From what we understand and have been told by the authorities there are no allegations of wrongdoing against Mark (Reilly),” the spokesman said. [Source]

Read more about the GlaxoSmithKline scandal, via CDT.


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