Chinese police on Wednesday said they had charged the British former China head of drugmaker GlaxoSmithKline PLC and other colleagues with corruption, after a probe found the firm made billions of yuan from elaborate schemes to bribe doctors and hospitals. Mark Reilly and two Chinese executives, Zhang Guowei and Zhao Hongyan, were also suspected of bribing officials in the industry and commerce departments of Beijing and Shanghai, the official Xinhua news agency reported, quoting police in Hunan province.
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 for between seven and 14 years. GSK is Britain''s biggest drugmaker. "(GSK) departments offered bribes to hospitals and doctors as well as personnel to boost their sales. The money involved was in the billions of yuan," a Ministry of Public Security official told a press conference in Beijing.
The charges - which carry a maximum sentence of life in prison in the case of bribery - were seen as harsher than many industry insiders and China-based foreign executives had expected. Officials gave no specific details on the amount of bribes paid or exactly how much the company had illegally earned, although they had previously accused the firm of funnelling up to 3 billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials.
GSK said the case was deeply concerning. "We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK," the drugmaker said in a brief statement issued in London, its headquarters. "We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens." Shares of London-listed GSK were trading down 1.2 percent, underperforming a 0.2 percent drop in the broader FTSE 100 index .
GSK has said that some of its senior Chinese executives appeared to have broken the law. It has also said it has zero tolerance for bribery, calling the allegations in China "shameful". Reilly briefly left China when the scandal broke in July last year but voluntarily returned to cooperate with police. Attempts to reach him on Wednesday were unsuccessful. He was replaced as GSK''s China head on July 25 last year, 10 days after the initial Chinese police accusations. A spokesman for the British consulate in Shanghai said officials were in regular contact with Reilly and were providing consular assistance. The spokesman declined to comment on Reilly''s whereabouts.
FOREIGN EXECUTIVES SURPRISED The charges against the British executive shocked the business community as GSK had previously said it believed the alleged corruption involved senior Chinese staff only. Kenneth Jarrett, president of the American Chamber of Commerce Shanghai, said he was surprised at the "strong response" from the police. "I would agree that it''s not what I would have expected because it seemed like GSK were co-operating very closely with the authorities," he told Reuters. "I don''t think that anyone had been lulled back into complacency, but if anybody had this will wake them up," Jarrett added. The GSK scandal had spurred many foreign corporations in China to increase vigilance against bribery.
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