The chief executive of GlaxoSmithKline has insisted the British drugs group had no knowledge of the alleged cash and sexual favours bribery scandal which has engulfed the company in China before the police arrested four of its senior Chinese executives last week.
Sir Andrew Witty, GSK’s chief executive, said the company’s headquarters had “no sense” of the “shameful” and “deeply disappointing” allegations that some GSK China executives are the “godfathers” of a criminal scam, bribing doctors with cash and sexual favours worth £320m.
Witty, who was speaking publicly about the “fraudulent behaviour” for the first time, said: “It appears that certain senior executives in the Chinese business have acted outside of our processes and our controls to both defraud the company and the Chinese healthcare system.”
He said the company has “zero tolerance” for the alleged behaviour, which is “totally contrary” to GSK’s values.
However, he repeatedly refused to say if he would hand back some of his bonus this year if the company was found to have broken the law in China. He said the level of his bonus – which totalled £2.7m last year – is “really a matter for the board”.
Witty added that he was “absolutely committed to rooting out corruption and we are absolutely committed to getting to the bottom of what has happened”.
The GSK boss, who was paid £3.9m last year, said he was “absolutely willing and ready” to go to China to head up the company’s investigation. However, he is leaving the day-to-day handling of the crisis to Abbas Hussain, GSK’s head of emerging markets, who flew out to China take control of the situation last week.
He refused to provide details of how the alleged fraud operated, but said the Chinese policeinvestigation is focused on the four Chinese nationals already detained by the police. He said they appear to have been “potentially defrauding GSK and also at the same time allegedly doing some things in the market which are clearly inappropriate and illegal”.
The Chinese investigators have “no allegations” against Mark Reilly, the British head of GSK China, or Steve Nechelput, its finance director in the country, Witty said. He said Reilly, who has left China for the UK, and Nechelput, who the Chinese have banned from leaving the country, have been helping GSK with its investigation.
Witty said GSK’s head office in London had no knowledge of the alleged fraudulent activity until the Chinese police raid its offices in Shanghai earlier this month. “As far as headquarters, we had no sense of this issue.”
This is despite GSK declaring last month that a four-month internal investigation into allegations of bribery and corruption in China found “no evidence of corruption or bribery in our China business”.
Witty said the previous allegations raised by a whistleblower were “quite different” to the new charges. “They are two completely different sets of issues: we fully investigated the first and of course this has now surfaced in the last couple of weeks,” he said.
GSK has already pumped in extra cash into its investigations team in China to help them to get to the bottom of the scandal, Witty said.
Despite the apparent serious breach of compliance, Witty said GSK’s controls and audit systems are “extremely robust”, but promised the company would “learn from this and make changes”.
It comes a year after Witty promised a company-wide overhaul to prevent a repeat of a scandal in which GSK staff tricked and bribed doctors into prescribing dangerous antidepressants to children in the US. “We’re determined this is never going to happen again,” he said last summer after GSK paid a record $3bn (£1.9bn) fine to settle the claim.
GSK has “reached out” to regulators in the UK and the US and has “consulted with the UK government” about the Chinese investigation.
He warned that the allegations are likely to have “some impact” on GSK’s future performance in China, but said it was “too early to quantify the extent”.
GSK reported a 2% rise in second-quarter sales to £6.6bn. Its drug and vaccine sales in China rose 14% to £212m. China accounts for just over 3% of the company’s global sales.
China indicated that its investigation into the “rampant” bribery scandal will be extended to other foreign and local drug companies. “It will not be surprising if more pharmaceutical companies and hospitals, domestic or international, are to be involved in probes in the days to come,” the Chinese state news agency said yesterday. “Big international firms should shoulder [their] due responsibilities to bid farewell to malpractice, setting a good example and serving as a wake-up call for domestic pharmaceutical companies.”
GlaxoSmithKline CEO: London HQ knew nothing of China scandal
Sir Andrew Witty said the drug firm had ‘no sense’ of the ‘shameful’ allegations that some GSK China executives bribed doctors with cash and sexual favours worth £320m
- The Guardian, Wednesday 24 July 2013 18.42 BST
GlaxoSmithKline (GSK) headquarters in London. CEO says HQ was unaware of the alleged bribery in China. Photograph: Odd Andersen/AFP/Getty Images