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GSK fined, executives face jail sentence in Chinese bribery case

Published on 19/09/14 at 10:13am

China has fined Britain’s largest pharma firm GlaxoSmithKline $490 million (£297m) for corruption after a year-long investigation into claims it bribed doctors to prescribe its medicines in the country.

Changsha Intermediate People’s Court in Hunan Province in China, ruled today that GSK China has “offered money or property to non-government personnel in order to obtain improper commercial gains, and been found guilty of bribing non-government personnel”.

The penalty follows allegations the drug giant paid out around £320 million worth of bribes to doctors and hospitals in order to have their products promoted.

The verdict follows investigations initiated by China’s Ministry of Public Security in June 2013 and the sentencing of a GSK private investigator and his wife last month, who were hired by the firm to look into a secret sex tape made of its China Boss Mark Reilly and his Chinese girlfriend.

The PI Peter Humphrey and his wife both received two and half years’ and two years’ prison sentences respectively, and will be deported back to the UK after they serve their time. They were both charged with “illegally collecting private information”.

In an interview with The Daily Telegraph recently, Harvey Humphrey, the couple’s 19-year-old son, told the paper: “When I saw my dad last, I mentioned GSK once. I mentioned Reilly to him once. He expressed a very low opinion of Reilly.”

Reilly, who like Humphrey is also a British citizen, will in fact also be among those facing a three-year prison sentence - although it has been suspended for four years. He is expected to be deported back to the UK.

Zhang Guowei, the company’s head of human resources, was also given a three-year suspended sentence and both Liang Hong, the head of operations, and Zhao Hongyan, the company’s legal counsel, were given a two-year suspended sentence, according to Xinhua.

Huang Hong, a member of the procurement department, also received a suspended sentence.

All four were also convicted under article 164 in Chinese law, and it is understood they will be dismissed by the company.

GSK says it had “published a statement of apology to the Chinese government and its people”.

Sir Andrew Witty, GSK’s chief executive says in a statement: “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this.

“GSK has been in China for close to a hundred years and we remain fully committed to the country and its people. We will continue to expand access to innovative medicines and vaccines to improve their health and well-being. We will also continue to invest directly in the country to support the government's health care reform agenda and long-term plans for economic growth.”

The firm says that the fine will be funded through existing cash resources and associated costs and charges related to restructuring will be included in GSK’s third quarter update.

“It’s not massive,” Nick Turner, an analyst at Mirabaud, tells Bloomberg of the China penalty. “The market will be relieved the fine isn’t of the magnitude that people were concerned it could be.”

But GSK still faces investigations by the US Justice Department and the UK’s Serious Fraud Office, which mean potentially multi-billion dollar fines could still be on the horizon.

GSK has also been accused of similar improper conduct by whistleblowers in Poland, Iraq, Jordan and Lebanon over the past year - investigations here are also still ongoing.

Ben Adams

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