GSK Corruption in Iraq… More Details Emerge… (Wall St Journal)


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Glaxo Investigates Bribery Accusations in the Mideast

Emails to U.K. Drug Maker Allege Corrupt Practices in Iraq

CONNECT

April 6, 2014 3:48 p.m. ET

Chinese authorities last summer accused GlaxoSmithKline of bribing doctors. Bloomberg News

GlaxoSmithKline GSK.LN -1.51% PLC is investigating allegations of bribery by employees in the Middle East, according to emails reviewed by The Wall Street Journal, opening a new front for the company as it manages a separate corruption probe in China.

A person familiar with Glaxo’s Mideast operations emailed the U.K. drug company late last year and earlier this year to report what the person said were corrupt practices in Iraq, including continuing issues and alleged misconduct dating from last year and 2012.

The emails cite behavior similar to Glaxo’s alleged misconduct in China, including alleged bribery of physicians.

Chinese authorities last summer accused Glaxo of bribing doctors and since have been investigating the company. China said last July that it had detained four of Glaxo’s senior Chinese staff, but none has been charged. Glaxo says it appears that some its senior staff in China may have broken the law and that it is cooperating with the investigation. The company has cut some staff in China in connection with the inquiry, a person familiar with that matter said.

Glaxo said it takes all of the allegations seriously and started investigating the Iraq matters as soon as it became aware of them. The investigations are continuing.

The person familiar with Glaxo’s Mideast operations emailed the company saying, “I believe GSK practices in Iraq violate the FCPA and the U.K. Bribery Act.” The U.S. Foreign Corrupt Practices Act addresses bribery of foreign officials by U.S. businesses or foreign corporations trading securities in the U.S.

In an email, the person said Glaxo hired 16 government-employed physicians and pharmacists in Iraq as paid sales representatives for the company while they continued to work for the government.

A government-employed Iraqi emergency-room physician has prescribed Glaxo products, even when they weren’t in the hospital’s pharmacy and a competitor’s brand was in stock, an email from the person said.

Glaxo has been hiring government-employed Iraqi doctors as medical representatives and paying their expenses to attend international conferences, the person alleged in the emails. Glaxo pays other doctors high fees to give lectures in exchange for promoting and prescribing its drugs, the allegations continued.

After Glaxo won a contract with the Iraqi Ministry of Health in 2012 to supply the company’s Rotarix vaccine, Glaxo paid for a workshop in Lebanon for Iraqi Ministry of Health officials, the email said. That included paying for a doctor’s family to travel to Lebanon “so it would be a family vacation for him at the hotel.”

The emails to Glaxo said that the person planned to share the information with the U.S. Justice Department and the Securities and Exchange Commission. The agencies declined to comment.

A new whistleblower program at the SEC, established in 2010 with the passage of theDodd-Frank financial-reform act, provides cash incentives for employees to report securities violations, including breaches of the FCPA. If the SEC gets involved and finds wrongdoing after a whistleblower complaint, the person stands to gain as much as 30% of any monetary sanction the agency recovers.

Glaxo has disclosed in SEC filings that the Justice Department has been investigating the company since 2011 as part of an industrywide bribery probe into pharmaceutical companies. It was unclear if the Justice Department is investigating the allegations in China or those raised by the person in the Mideast.

Glaxo responded to the emails, saying the allegations were being taken seriously. “Our collection and analysis of data continues and the scope of the investigation now covers several countries and business units” in the Gulf and Near East region, said a March 13 email from Glaxo’s head of compliance investigations to the person. The Glaxo region includes the nine countries of United Arab Emirates, Qatar, Bahrain, Oman, Kuwait, Lebanon, Syria, Jordan and Iraq.

“We have members from Legal (internal & external), Compliance, Corporate Security and ABAC working on this as a team with the full support of the Corporate Executive Team and Board members,” the email from Glaxo’s compliance head said. ABAC stands for antibribery and corruption, according to an earlier email from the same person. “This is a substantial piece of work to undertake both in volume and complexity so it will continue to take some time to complete.”

The drug maker has zero tolerance for unethical or illegal behavior, has strict controls in place globally with regard to compliance matters, bribery and corruption, and takes the allegations seriously, Glaxo said in a statement to the Journal. Glaxo has reinforced governance requirements in Iraq, including those covering payments to doctors and travel agencies, provision of samples and processes around public-tender submissions like the awarding of government vaccine contracts, the statement said.

The company has also put a temporary stop to all interactions between Glaxo and government officials in the region, “to ensure any activity is in compliance with our policies and procedures,” Glaxo said.

Glaxo said in December that it was stopping all payments to doctors to attend conferences or speak about its drugs—a policy it expects to be in place globally by 2016.

Write to Christopher M. Matthews at christopher.matthews@wsj.com and Hester Plumridge at Hester.Plumridge@wsj.com

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