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GSK fined $487m as Chinese probe concludes

Five former executives receive jail sentences

china court peter humphrey gsk

GlaxoSmithKline been fined £297m ($487m) in a Chinese court after being found guilty of bribing doctors for "improper commercial gains."

In a statement, the company said the bribes offered to non-government personnel by its subsidiary GSK China Investment (GSKCI) were "a clear breach of GSK's governance and compliance procedures" and "wholly contrary to the values and standards expected from GSK employees."

The Xinhua news agency has also reported that five former GSK executives received jail sentences as a result of the investigation, including the head of its Chinese operations Mark Reilly who was sentenced to three years in prison - suspended for four years - and will be deported from the country.

Former executives who will serve jail time include former human resources director Zhang Guowei, former vice president and operation manager Liang Hong and former legal affairs director Zhao Hongyan, according to the news agency, while business development manager Huang Hong received three years suspended for four years.

GSK has published a contrite apology to the Chinese government and its people on the website of its local subsidiary which not only apologises for the bribery but also for "harm caused to individuals who were illegally investigated by GSKCI."

The latter refers to the activities of Peter Humphrey and his wife Yu Yingzeng of ChinaWhys consultancy, who were jailed last month for breaking privacy laws whilst investigating the bribery allegations for GSK.

The fine is about equivalent to the scale of the fraudulent activity carried out by GSK in China, which first emerged in 2013 with some analysts suggesting the company had been lucky to escape with a relatively low financial penalty.

The Chinese investigators claimed that the company has paid $490m in kickbacks to healthcare workers since 2007, using a network of around 700 middlemen, including travel agencies and consultancy firms.

The legal verdict may draw a line under the episode for GSK but the company is still under investigation by the authorities in the UK and US, which could lead to additional penalties. Meanwhile, allegations of fraudulent behaviour have been made in other countries such as Poland, Syria, Iraq, Jordan and Lebanon.

The company's chief executive Sir Andrew Witty, said: "This has been a deeply disappointing matter for GSK. We have and will continue to learn from this.”

The company has implemented a series of changes to try to de-incentivise corrupt practices, such as removing sales targets for reps.

Article by
Phil Taylor

22nd September 2014

From: Sales, Regulatory

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