GlaxoSmithKline contacts Serious Fraud Office over its China activities

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GlaxoSmithKline has briefed criminal investigators from the Serious Fraud Office on its activities in China as chief executive Sir Andrew Witty prepares to face a questions this week over bribery and corruption allegations in one of the its fastest growing markets.

GSK has not admitted wrongdoing but has said: "These allegations are shameful and we regret this has occurred." Witty is expected to face questions on what his internal investigation into the affair has thrown up when he delivers GSK's interim results on Wednesday.

Under the 2010 Bribery Act, the SFO has powers to investigate and prosecute corruption at home or abroad. In some circumstances companies can be considered for immunity from prosecution if they can demonstrate they have been pro-active and alerted SFO investigators to evidence of wrongdoing immediately they learned of it.

A spokesman for GSK would not answer questions about contact with the SFO, saying only: "We are keeping all regulators up to date as appropriate."

Police are examining allegations that GSK is at the heart of an alleged £320m bribery network, siphoning payments and perks to health officials and doctors through more than 700 "travel agencies", tasked with organising conferences for doctors. Some reports over the weekend suggested the substantive allegations centred on as few as 25 such agencies.

GSK was described by Chinese officials as playing a "godfather" role at the centre of these agent companies. However, Witty is likely to tell investors on Wednesday that GSK's compliance team in China has been challenged by the scale of his company's growth there. Keeping track of the activities of all agents has been tough and he has already instigated a review of "all third party relationships".

Sales in China grew 20% to £1bn last year and Witty quipped to City analysts in February that controlling operations in the country was "not a trivial proposition".

A British national and nine others – all working for a corporate intelligence firm – were reported over the weekend to have been arrested as part of the investigation into GSK.

Police had previously arrested four Chinese GSK executives and have raised concerns about the timing of a flight out of the country taken by the drug firm's regional boss Mark Reilly shortly after the corruption inquiry was announced on 27 June. He has not returned since. Reilly's finance director, Steve Nechelput, has been banned from leaving China by the authorities.

Last year Witty reached a $3bn deal with criminal prosecutors in the US and GSK pleaded guilty to a raft of offences linked to the illegal promotion of its drugs in America. Many of the allegations related to extravagant travel provided to doctors whose business GSK was courting.

After securing the settlement, Witty said: "In recent years, we have fundamentally changed our procedures for compliance, marketing and selling in the US to ensure that we operate with high standards of integrity and that we conduct our business openly and transparently."

Powered by article was written by Simon Bowers, for on Sunday 21st July 2013 19.16 Europe/London © Guardian News and Media Limited 2010


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