Following claims last week by Chinese authorities that British pharmaceutical giant GlaxoSmithKline (GSK) had engaged in corrupt practices on the mainland, Xinhua News reported on Monday that four GSK executives are being held by Chinese police in connection with “serious economic crimes:”
The executives, identified by their Chinese names, include Liang Hong, vice president and operation manager of GSK (China) Investment Co., Ltd, the company’s vice president and human resource director Zhang Guowei, legal affairs director Zhao Hongyan and business development manager Huang Hong, according to the investigation team.
[…] The suspects are believed to have offered large bribes to government officials, medical industry associations and foundations, hospitals and doctors in order to expand the company’s market in China and raise the price of its medicine.
[…] Most of the bribes, which could account for between 20 percent and 30 percent of medicine prices, are thought to have been given through travel agencies. [Source]
The head of the economic crime investigation unit of China’s Ministry of Public Security held a news conference on Monday, according to The Wall Street Journal, confirming the detentions and saying that GSK had sent 3 billion Chinese yuan (almost US$500 million) in bribes through travel agencies since 2007. Chinese police say they have identified more than 700 middlemen used by GSK to direct money to government officials and doctors, according to The Telegraph’s Malcolm Moore:
“This company has been investigated for bribery allegations in many countries. From our investigation, bribery is part of the strategy of this company. This is why they have bribery activities in China,” said Gao Feng, the head of the economic crimes investigation unit at the Ministry of Public Security.
[…] The police described a system by which GSK had used “travel agencies” and “consultancies” to disburse bribes.
“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 organisation, there is always a boss. In this game, GSK is the godfather.”
He said senior GSK executives had been drawn into close relationships with some of the middlemen, who would give them both financial and sexual kickbacks in order to win their business. “To win GSK’s favour some agencies not only offered money, but also sexual favours,” he said. [Source]
One analyst told Reuters that it is unusual for police to reveal details of such an investigation at such an early stage, suggesting that the detained executives would likely be charged and found guilty:
“The police would not usually reveal the details of cases they are handling … they usually wouldn’t reveal so much information before a final judgment is handed down,” said Yang Zhaodong, partner at Chinese law firm King & Capital, while declining to comment specifically on the GSK case.
“If they are already revealing such information, it means that they feel they have a fairly complete set of evidence.” [Source]