News Column

SFO probe into China bribes sends GSK shares down

May 29, 2014

By Ben Griffiths, Daily Mail, London

May 29--More than pounds sterling 1.3bn was wiped from the stock market value of GlaxoSmithKline yesterday as investors reacted to news of a criminal investigation into the company's activities in China.

On Tuesday evening the Serious Fraud Office revealed it was looking into the drugs giant's 'commercial practices', a clear reference to allegations the group bribed doctors and officials in China to prescribe its medicines.

The scandal blew up last year when Chinese authorities accused the FTSE 100-listed firm of routing money through a network of travel agencies. Shares fell 26p to 1608.58p yesterday.

In August four senior GSK China executives were arrested amid allegations the business used more than 700 travel agencies to funnel bribes to doctors, hospital officials and other medical professionals to boost the sale of medicines.

Among the claims were that GSK used 'sexual bribery', offering prostitutes to doctors to help persuade them to prescribe its drugs.

Further allegations have since surfaced that GSK paid bribes to doctors in Poland, Iraq, Jordan and Lebanon.

GSK boss Sir Andrew Witty labelled the allegations 'shameful' and the company denied it had a 'systematic' problem with improper behaviour, insisting a clutch of local executives were to blame.

Local police this month charged executive Mark Reilly, who ran GSK's Chinese business, with bribery and fraud along with other workers.

The involvement of the SFO means Witty and GSK could face prosecution under the UK Bribery Act and the US Foreign Corrupt Practices Act. The bosses of companies found to have engaged in corrupt practices face prison and unlimited fines under the UK laws.

GSK said it was 'committed to operating its business to the highest ethical standards' and would 'continue to co-operate fully with the SFO'.

It can probably claim mitigation if it can prove it had robust policies and procedures in place that were circumvented by rogue employees.

The US is already looking into the company for possible violations of its laws in China.

The SFO has appealed for whistleblowers with knowledge of GSK's practices overseas to come forward.

Even if the group does face a fine or ban, it is unlikely to suffer lasting damage China represented just 3pc of global revenues last year.


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Source: Daily Mail (London, England)

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