Chinese Court Hits GlaxoSmithKline With $492M Bribery Fine

Published: Sep 19, 2014

Chinese Court Hits GlaxoSmithKline With $492M Bribery Fine

September 19, 2014

By Mark Terry, Breaking News Staff

A court in southern China has fined United Kingdom-based GlaxoSmithKline almost $500 million on charges of bribery, the company said Friday.

The Changsha Intermediate People’s Court also sentenced Mark Reilly, formerly GSK’s China general manager, and four other company managers, to prison terms that could last up to four years. The sentences were suspended, which potentially allows them to avoid jail time if they stay out of trouble. Reilly will be immediately deported, although it appears that he wasn’t currently in the country anyway, but returned for testimony and the trial.

In a statement, GSK indicated the defendants all pled guilty and would not appeal. GSK said the company “fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities.”

GSK has also been accused of corruption and bribery in Syria, as well as in Iraq, Lebanon and Poland. In China the GSK officials were accused of bribing physicians through travel agencies, spending up to $458 million. The charges against Reilly also included the release of a covert sex tape of Reilly and his girlfriend.

The UK’s Serious Fraud Office is currently conducting a criminal investigation into GSK’s global sales practices. In addition, the U.S. Department of Justice is investigating the company for possible violations of the Foreign Corrupt Practices Act.

In a press release, Sir Andrew Witty, GSK Chief Executive Officer, stated, “Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this. GSK has been in China for close to a hundred years and we remain fully committed to the country and its people.”

The company also posted an apology to the Chinese people on its Chinese website.

The story underlines the perils of doing business abroad, especially in countries with reputations for corruption. “It’s very hard to do business in the Chinese health care and pharmaceutical sectors without doing payoffs. Everyone else pays bribes. Glaxo just got caught,” David Zweig, the director of the Center on China’s Transnational Relations at the Hong Kong University of Science and Technology, said in a New York Times article.

That background story in GSK’s case had a convoluted timeline. A sex tape of Reilly and his girlfriend was sent to the company. Reilly hired a private investigator to determine who had planted the camera in his apartment, who was subsequently arrested and confessed on Chinese TV. And there were also allegations that both Reilly and the detective might have been set up by corrupt individuals in China’s law enforcement and security programs. Now GSK appears to be paying the fine, accepting the charges and moving on with business.

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