China steps up inquiry into GlaxoSmithKline

The Chinese authorities have stepped up their investigation into accusing it of being the ringleader of a half-a-billion-dollar bribery scandal involving 700 companies.

In a rare briefing to foreign media, Gao Feng, the lead Chinese investigator on an inquiry into the UK drugs group, said police were examining Rmb3 billion ($500 million) in deals from as far back as 2007.

Chinese police believe GSK used travel agencies and consultancies as a conduit to bribe doctors and lawyers to boost sales and profits, he said. The UK-based pharmaceutical giant said it had frozen all links with more than 20 Chinese travel agencies connected to the corruption investigation and launched its own internal inquiry, describing the alleged practices as "shameful".

“These allegations are shameful and we regret this has occurred. We are deeply concerned and disappointed by these serious allegations of fraudulent behaviour and ethical misconduct by certain individuals at the company and third-party agencies,” the company said in a statement. “GSK has zero tolerance for any behaviour of this nature.”

Executives detained
Four senior GSK executives in China, all Chinese nationals, have been detained as part of the investigation, according to the ministry of public security. Mr Gao said GSK's top executive, a British national, in China had left the country after the inquiry was announced.

“We found that bribery is a core part of the activities of the company,” said Mr Gao. “To boost their prices and sales, the company performed illegal actions.” He added that “just like criminal organisations always have a ringleader, in this criminal scheme GSK is the ringleader”.

GSK said last week its investigations in China found no evidence of bribery or corruption of doctors and officials, but that it would “act swiftly” if evidence was provided.

Mr Gao suggested the inquiry could extend to other foreign drug companies. China last week said GSK employees had confessed to bribing government officials and doctors, but provided few details.

Mr Gao yesterday confirmed GSK was also under investigation for alleged tax-related crimes.

– (Copyright The Financial Times Limited 2013)