UK fraud office investigates GSK after claims of bribery

Serious Fraud Office probes drugmaker’s practices in ‘numerous’ jurisdictions

A file photograph showing a security guard walking past the GlaxoSmithKline (GSK) company sign outside the GSK factory in Shanghai. Photograph: EPA

A file photograph showing a security guard walking past the GlaxoSmithKline (GSK) company sign outside the GSK factory in Shanghai. Photograph: EPA

Wed, May 28, 2014, 15:06

Britain’s fraud office has launched a formal criminal investigation into GlaxoSmithKline, posing a new challenge to the drugmaker, which already faces claims of bribery in China and four other countries.

The Serious Fraud Office (SFO) said late today that its director had “opened a criminal investigation into the commercial practices of GlaxoSmithKline and its subsidiaries”, confirming an earlier brief statement from the company.

Shares in the company - Britain’s biggest drugmaker and the sixth-largest pharmaceuticals group in the world by sales - fell 1.5 per cent today.

GSK is committed to operating its business to the highest ethical standards and will continue to co-operate fully with the SFO,” the company said. Neither the SFO nor GSK gave any further details about the case, and a company spokesman declined to elaborate.

However, one person familiar with the matter said the SFO was investigating GSK’s practices in “numerous” jurisdictions. The SFO action comes less than two weeks after Chinese police announced on May 14th that they had charged the former British boss of GSK’s China business and other colleagues with corruption, after an investigation there found evidence of an elaborate scheme to bribe doctors and hospitals.

The case is the biggest corruption scandal to hit a foreign company in China since the Rio Tinto affair in 2009, which resulted in four executives, including an Australian, being jailed. The decision by the British fraud office does not come as a complete surprise, since lawyers and industry analysts had pointed out that allegations against GSK in overseas markets could expose it to charges under the UK Bribery Act.

The new act, like the long-established US Foreign Corrupt Practices Act (FCPA), prohibits payments to government officials, including state-employed doctors, to obtain business overseas.

However, GSK can claim mitigation against prosecution if it can demonstrate that it had robust policies and procedures in place that were circumvented by rogue employees.

“Given GSK is UK headquartered it perhaps isn’t very surprising to hear that the SFO is looking at the issue too and that they may be interested in activities since July 1st, 2011, when the Bribery Act came into force, as from that date the corporate offence of failing to prevent bribery began to apply,” said Omar Qureshi, a partner at law firm CMS Cameron McKenna.

US authorities are already investigating the British drugmaker for possible violations of US anti-bribery laws in China, sources familiar with the matter told Reuters last September. Societe Generale analyst Stephen McGarry said the ability to claim mitigating circumstances meant GSK might not face major fines, but the bad publicity “may restrain GSK’s share price performance in the near-term”.

Reuters