China: GlaxoSmithKline plc Is Bribing Officials

By Ian Wilson (Flickr) [CC BY 2.0 or CC BY 2.0], via Wikimedia Commons

GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) executives have confessed to charges of bribery and tax law violations, according to China’s security ministry.

China: GlaxoSmithKline plc Is Bribing Officials

GlaxoSmithKline Executives Suspected Of Offering Bribes

GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) executives are suspected of offering bribes to officials and doctors to enhance their product sales in China.

According to Chinese security ministry, GSK offered bribes to Chinese government officials, medical associations, hospitals and doctors to enhance sales and prices of their products.

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Under China’s legal system, the GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) executives will be formally charged after the completion of the preliminary investigations.

The statement from China’s Public Security Bureau said the investigation was being conducted by police in the cities of Changsa, Shanghai and Zhengzhou, but did not give details on the number of executives questioned, their identities or when the questioning took place.

Suspects Admitted To Crime

According to China’s Public Security Bureau, after initial questioning, the suspects have admitted to the crime and the investigation is ongoing.

The allegations include using fake receipts in breach of Chinese tax laws, besides offering free travel as ‘large bribes’.

However, the British drug maker denied such allegations. In a statement, Britain’s biggest drug maker said it takes all allegations of bribery and corruption seriously. Besides GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) indicated it continuously monitors its business to ensure the business meets its strict compliance procedures. It also found there is no evidence of bribery or corruption.

Senior executives of the British drug maker are already being investigated by Changsha public security officials for “economic crimes”, the city’s police force said last month. However, it is not clear if the Changsha investigation is related to any of the latest allegations.

Foreign Firms Targeted

According to the Reuters report, in the recent past China has been targeting foreign firms on several counts, including alleged price-fixing, quality controls and consumer rights. The foreign firms are compelled to defend their reputations in China where international brands carry higher pedigree and trust over local competitors.

During March 2010, four executives of mining giant  Rio Tinto plc (ADR) (NYSE:RIO) were jailed for taking bribes and stealing commercial secrets.

China has been quite active to control fraudulent activities. Recently, the China Securities Regulatory Commission punished two brokerage firms for failing in their due diligence while launching Initial Public Offering in 2011 and 2012.