Great success seemed unlikely in this case. To begin with, suicide malpractice suits are very difficult to win. Juries understandably want to hold people responsible for their behavior when they kill themselves. I was going to testify that a single dose of Prozac 30 mg was the main cause of his suicide, a conclusion that other experts would vigorously challenge.
In addition, the case was in an area of the country where juries are conservative about giving monetary awards to plaintiffs. It was in the U.S. District Court for middle Pennsylvania in the city of Scranton.
Juries also tend to look askance at claims made on behalf of people in jail. Mr. Mumun Barbaros, the deceased victim, was in his fourth day of incarceration, awaiting release on bail. The judge did not allow the jury to know the nature of his alleged crime or the charges against him, and I was not permitted to comment on them. If allowed, I would have testified that Paxil-induced disinhibition drove him to vandalize the property of a man in a competing business.
Some people are also less sympathetic to naturalized citizens with strong ties to their countries of origin. Mr. Barbaros was a Bulgarian who became a citizen, but his wife and children spent only part of the year with him and he sent back large amounts of his earnings from his tavern to his extended family back home.
Finally, the case had scientific complexities that the jury had to understand.
The defendants were the independent healthcare provider to the jail, PrimeCare, and several of its personnel or contractors assigned to the jail. Mr. Barbaros had been taking Paxil for anxiety for many years, along with the sedating antidepressant trazodone to help him sleep.
At the time of his arrest, Mr. Barbaros reported that he needed his medication. Due to a series of errors upon the part of the healthcare personnel, his request for medication went unfilled for four days. By the second and third day, Mr. Barbaros develop headaches and hypertension, and his chronic stomach problem worsened, but no one attributed these symptoms to withdrawal. However, his intake evaluation and contacts with healthcare providers documented an absence of suicidal thoughts and revealed no great distress.
When the staff finally confirmed Mr. Barbaros’ medications, a licensed practical nurse (LPN) from the jail phoned the psychiatrist on call and asked him to prescribe the Paxil 30 mg and trazodone 100 mg. The LPN did not offer the doctor any information about Mr. Barbaros, such as his age, the reason he was taking the medications, how long he had been taking them, and how long he had been without them in jail. The psychiatrist, in turn, did not ask the nurse any questions, but simply authorized the drugs.
I testified that the psychiatrist’s actions were worse than practicing medicine negligently—he was not practicing medicine at all. He was more like a vending machine. I further testified that this was callous disregard, especially since he admitted to knowing that the drug had dangers associated with it, including suicide, and yet asked no information about the patient, did not come in to see him, and ordered no special supervision.
Following his first morning dose of the Paxil, Mr. Barbaros was seen for a routine evaluation by a staff psychologist in the mid-afternoon. At this point, Mr. Barbaros was drastically changed. He was no longer a man who conversed easily and showed no signs of significant stress, anxiety or depression. According to the psychologist’s deposition, Mr. Barbaros now looked extremely anxious and like a “cornered rat,” spoke very little, made poor eye contact, and looked hunched over and withdrawn. In the psychologist’s scantily written report, his only diagnosis was “rule out depression,” an entirely new diagnosis for Mr. Barbaros.
I attributed these drastic changes in Mr. Barbaros’ condition to the impact of the large dose of Paxil. The psychologist had not checked to see what medications Mr. Barbaros was taking. He did not check the medical record and therefore did not know that his current severely anxious and withdrawn state was entirely new for him during his incarceration. He did not ask his patient if he was suicidal.
In my direct examination, I testified that restarting the patient on his regular dose of Paxil 30 mg, despite a hiatus of at least four days without the medication, was a direct cause of the suicide later on the same day. Restarting him on Paxil 30 mg, when most of the drug was out of his system, caused akathisia (agitation with hyperactivity) and suicide. I also found that the doctor and the psychologist were negligent in several other ways, including their failure to evaluate the patient and to order careful monitoring.
I further explained that Paxil (paroxetine) is a selective serotonin reuptake inhibitor (SSRI) antidepressant. All antidepressants can cause suicidal and homicidal behavior, especially those like the SSRIs that routinely cause stimulation or activation, including akathisia, agitation, insomnia, disinhibition, emotional lability, hypomania and mania, and a general worsening of the patient’s condition. Of all the antidepressants, Paxil was the only one to show a statistically significant association with suicide in depressed adults in the short and deeply flawed clinical trials used for FDA approval of the drug.
One of the more dramatic moments in my testimony came on the first series of questions during cross-examination. When I began reviewing the case, I was asked to focus on Mr. Barbaros’ medical record going back approximately six years to the time when his primary care doctor had started him on Paxil 10 mg, apparently without difficulty, and then raised it gradually to 20 mg and then 30 mg. To be thorough, I examined all the remaining extensive medical records and came upon something remarkable buried within them that had previously escaped attention.
The day after his first dose of Paxil 10 mg, Mr. Barbaros became so anxious that he thought he was having a heart attack and sought immediate help at a local medical clinic separate from his primary care physician who prescribed the Paxil. That clinic referred him to a cardiologist on an emergency basis who evaluated him and found no physical disorder. These doctors treated Mr. Barbaros’ anxiety with prescriptions for a benzodiazepine tranquilizer.
Mr. Barbaros had experienced a very severe anxiety reaction to his first dose of Paxil, but it apparently never entered his mind that Paxil was causing it. From the medical record, it looks like he never told the emergency clinic or the cardiologist he had recently started taking Paxil and he never told his primary care doctor, when he returned for follow up later on, that he had been so anxious that he went to a cardiologist and received sedative tranquilizers. It is very common for individuals to fail to realize that their acute psychiatric emergencies are being caused by their psychiatric medication. I call this phenomenon “medication spellbinding” or intoxication anosognosia.
As a medical expert in a product liability case against GlaxoSmithKline, the manufacturer of Paxil, I had discovered from the company’s secret files that Paxil frequently caused severe psychiatric adverse reactions during the first few doses. I had published an article about this in the hope of alerting people to the risk. This earlier work of mine enhanced the credibility of my discussion.
So… when I was asked at the beginning of cross-examination to explain why Mr. Barbaros would have such a bad reaction to being restarted on Paxil since he never had a bad reaction to being started many years earlier, I had an unexpected answer. I could reply and document from the medical records that, in fact, he had a drastic psychiatric reaction to the original 10 mg dose but no one recognized that it was related to the Paxil. The defense attorney was so flummoxed by my revelation that he never even asked to see the relevant medical records. The cross-examination then went on for an unexpectedly long time, requiring me to come back a second day. The defense probably was hoping that the jury would forget the revelation I had disclosed in the first few minutes.
The jury not only found that PrimeCare and several of its practitioners and staff had been negligent, they further concluded that the company and most of the individual defendants acted with deliberate indifference to Mr. Barbaros’ medical needs.
Despite a vigorous challenge by the defendants’ attorneys, the judge qualified me as an expert in psychiatry, psychopharmacology and the specific drug Paxil. In the trial, other experts testified for the plaintiffs concerning the nursing care and administrative policies of the healthcare provider, as well as the violent method of Mr. Barbaros’ death by gagging himself.
The jury award included $2.8 million for negligence, $1.06 million for federal deliberate indifference and $8 million for punitive damages. The case is Ponzini et al. v. Monroe County et al., case number 3:11-cv-00413, in the U.S. District Court for the Middle District of Pennsylvania. The attorney for the plaintiff was Brian Chacker of Philadelphia. He worked extraordinarily hard and with great diligence on the case.
I do believe that the success of this case reflects greater awareness within the public and the judicial system concerning the dangers of psychiatric drugs.
SHANGHAI — Peter Humphrey was in the bathroom of his Shanghai apartment when the police kicked the door off its hinges and knocked him to the ground. Nearly two dozen officers stormed his home. They confiscated files, laptops and hard drives related to his work as a corporate investigator.
Mr. Humphrey and his wife, Yu Yingzeng, were taken to Building 803, a notoriously bleak criminal investigation center normally reserved for human smugglers, drug traffickers and political activists. Sleep-deprived and hungry, he was transferred later that day to a detention house, placed in a cage and strapped to an iron chair. Outside, three officers sat on a podium and demanded answers.
Mr. Humphrey knew the reason for the harsh interrogation. He and Ms. Yu had been working for GlaxoSmithKline, the British pharmaceutical maker under investigation in China for fraud and bribery.
The Glaxo case, which resulted in record penalties of nearly $500 million and a string of guilty pleas by executives, upended the power dynamic in China, unveiling an increasingly assertive government determined to tighten its grip over multinationals. In the three years since the arrests, the Chinese government, under President Xi Jinping, has unleashed the full force of the country’s authoritarian system, as part of a broader agenda of economic nationalism.
Driven by the quest for profits, many multinationals pushed the limits in China, lulled into a sense of complacency by lax officials who eagerly welcomed overseas money. Glaxo took it to the extreme, allowing corruption to fester.
When bribery accusations surfaced, the company followed the old playbook, missing the seismic changes reshaping the Chinese market. Rather than fess up, Glaxo tried to play down the issues and discredit its accusers — figuring officials wouldn’t pay attention.
Along the way, there were bribes of iPads, a mysterious sex tape and the corporate investigator, who gave his operations secret code names. The company’s missteps are laid bare in emails, confidential corporate documents and other evidence obtained by The New York Times, as well as in interviews with dozens of executives, regulators and lawyers involved in the case.
The aftershocks of the Glaxo case are still rippling through China. The authorities have unleashed a wave of investigations, putting global companies on the defensive. The government has intensified its scrutiny of Microsoft on antitrust matters this year, demanding more details about its business in China. And just two weeks ago, the authorities detained a group of China-based employees, including several Australian citizens, working for the Australian casino operator Crown Resorts, on suspicion of gambling-related crimes.
Companies are racing to find new strategies and avoid getting locked out of China, the world’s second-largest economy after the United States. Disney and Qualcomm are currying favor with Chinese leaders. Apple redid its taxes in China after getting fined. Some multinationals are training employees in how to deal with raids.
The crackdown has prompted a complete rethinking for Glaxo — and for much of the pharmaceutical industry. To appease the government, drug makers have promised to lower prices and overhaul sales practices.
“For a long time, there’d been this policy of going easy on foreign enterprises,” said Jerome A. Cohen, a longtime legal adviser to Western companies. “The government didn’t want to cause embarrassment or give outsiders the impression that China is plagued with corruption. But they’re not thinking like that anymore.”
The Glaxo case was fueled by missed clues, poor communication and a willful avoidance of the facts. For more than a year, the drug maker brushed aside repeated warnings from a whistle-blower about systemic fraud and corruption in its China operations.
The company’s internal controls were not robust enough to prevent the fraud, or even to find it. Internally, the whistle-blower allegations were dismissed as a “smear campaign,” according to a confidential company report obtained by The Times.
Glaxo just wanted to make its problems go away. It offered bribes to regulators. It retaliated against the suspected whistle-blower. It hired Mr. Humphrey and Ms. Yu to dig into the woman’s background, family and government ties, as a way to discredit her. And Glaxo may even have gone after the wrong person, documents and emails obtained by The Times suggest.
None of it mattered. The allegations were true.
Prosecutors charged the global drug giant with giving kickbacks to doctors and hospital workers who prescribed its medicines. In 2014 Glaxo paid a nearly $500 million fine, at the time the largest ever in China for a multinational. Five senior executives in China pleaded guilty, including the head of Glaxo’s Chinese operations, a British national, in a rare prosecution of a Western executive. With Glaxo embroiled in scandal, sales plummeted in China, the company’s fastest-growing market.
Glaxo has declined multiple requests for comment, referring instead to earlier statements. Glaxo “fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities,” one statement read. “GSK P.L.C. sincerely apologizes to the Chinese patients, doctors and hospitals, and to the Chinese government and the Chinese people.”
Mr. Humphrey and Ms. Yu, both in their late 50s at the time of their arrests, were punished too. The couple spent two years in prison for illegally obtaining government records on individuals.
Mr. Humphrey was crowded into a cell with a dozen other inmates. There were no beds or other furniture, just an open toilet and a neon light overhead. During his incarceration, Mr. Humphrey said, he suffered back pain, a hernia and a prostate problem that was later diagnosed as cancer.
“I was in a state of complete shock and breakdown,” said Mr. Humphrey, who was released along with his wife in July 2015. “I was physically broken down and mentally blown away. I didn’t sleep for 45 days.”
A Whistle-Blower Emerges
An anonymous 5,200-word email in January 2013 to the Glaxo board laid out a detailed map to a fraud in the Chinese operations.
Written in perfect English, the email was organized like a corporate memo. Under the header “Conference Trip Vacations for Doctors,” the whistle-blower wrote that medical professionals received all-expenses-paid trips under the guise of attending international conferences. The company covered the costs of airline tickets and hotel rooms, and handed out cash for meals and sightseeing excursions.
In a section labeled “GSK Falsified Its Books and Records to Conceal Its Illegal Marketing Practices in China,” the email explained how Glaxo was pitching drugs for unapproved uses. As an example, the whistle-blower said the drug Lamictal had been aggressively promoted as a treatment for bipolar disorder, even though it had been approved in China only for epilepsy.
Glaxo “almost killed one patient by illegally marketing its drug Lamictal,” said the email, which was obtained by The Times. “GSK China bought the patient’s silence for $9,000.”
The email was one of nearly two dozen that the whistle-blower sent over the course of 17 months to Chinese regulators, Glaxo executives and the company’s auditor, PricewaterhouseCoopers.
When the authorities pressed Glaxo, the company was dismissive. It failed to properly investigate the allegations. It didn’t beef up its internal controls. And it didn’t change its marketing practices.
The decision was calculated. In the decades since China began opening its economy, most multinationals had avoided scrutiny over bribery. China needed overseas companies to help develop its economy, by setting up manufacturing operations and creating jobs. The authorities were reluctant to jeopardize investment, so they took a softer approach to enforcement.
When companies did run into trouble, fines were tiny. The rare cases tended to be colored by politics. Seven years ago, the Chinese authorities detained executives from the global mining giant Rio Tinto on suspicion of stealing state secrets. The charges were eventually downgraded to bribery, and the company avoided punishment.
By the time Glaxo’s fraud bubbled to the surface, China had changed.
Over the last decade, China has emerged as an economic powerhouse, but it took off even more as the rest of the world slowed after the financial crisis. That gave China the upper hand with overseas companies, which were increasingly dependent on profits from the country’s growing consumer base.
The economic might coincided with the Communist Party’s increasingly nationalistic stance. The authorities in China, already undertaking a severe crackdown on Chinese companies, wanted to show that, like American regulators, they could also penalize and sanction global companies.
And it was no secret that big drug makers were violating the law in China.
Years earlier, the consulting firm Deloitte warned about rampant corruption in China’s pharmaceutical market. As Deloitte found, doctors and health care workers were poorly compensated, so they could easily be induced to write more prescriptions with offers of cash, gifts, vacations and other benefits. Big drug makers, eager for growth, willingly obliged.
“The remarkable thing is that China is a more hospitable environment to this type of corruption, because it’s a market where doctors and hospitals are heavily reliant on drug sales,” said Dali Yang, who teaches at the University of Chicago and has studied the industry. “They were like fish swimming in water.”
American investigators had punished several major drug companies for such behavior abroad. In 2012, Eli Lilly agreed to pay $29 million, and Pfizer $45 million, to settle allegations that included employees’ bribing doctors in China. In settling the cases, neither company admitted or denied the allegations.
That summer, Glaxo agreed to pay $3 billion in fines and pleaded guilty to criminal charges in the United States for marketing antidepressants for unapproved uses, failing to report safety data on a diabetes drug and paying kickbacks. The case was built off tips from several whistle-blowers.
After that, Glaxo’s chief executive, Andrew Witty, pledged, “We’re determined this is never going to happen again.”
But it did — in China.
In early 2013, Glaxo realized it couldn’t ignore the problems. The authorities were asking questions. The whistle-blower continued to send emails.
So the company tried another common gambit in China: bribing officials.
The company set up a special “crisis management” team in China and began offering money and gifts to regulators.
That strategy had worked in the past. A company, often using a middleman, would try to soothe officials and regulators, offering gifts and favors.
One government agency had received multiple emails from the whistle-blower, and Glaxo targeted multiple branches of the agency, according to state media reports. One executive tried to cozy up to a Shanghai investigator with an iPad and a dinner totaling $1,200, another Glaxo employee said in a statement to the police. When that executive asked for money to bribe the Beijing branch, Mark Reilly, the head of the company’s Chinese operations, gave the “go ahead.”
Another executive with Glaxo’s Chinese operations bribed regulators to focus on “unequal competition,” rather than a more punitive investigation into “commercial bribery.” The goal, that executive admitted in a statement, was to limit any potential fine to about $50,000. It didn’t work.
As pressure mounted, the case took a bizarre turn, setting Glaxo on a collision course with the government.
In March 2013, Glaxo’s chief executive and five other senior executives in the company’s London headquarters received an anonymous email with a media file. In it, a grainy video showed Mr. Reilly, the executive in China, engaged in a sexual act with a young Chinese woman.
The attached email alleged that Mr. Reilly, a British national who had helped manage the company’s China operation for four years, was complicit in a bribery scheme tied to a travel agency called China Comfort Travel, or C.C.T. According to the email, Glaxo funneled money through the travel agency to pay off doctors. The travel agency also supplied Mr. Reilly with women, as a way to secure that business.
“In order to acquire more business, C.C.T. bribed Mark Reilly, the general manager of GSK (China) with sex,” the email said. “Mark Reilly accepted this bribery and made C.C.T. get the maximized benefits in return.”
Glaxo later discovered that the video had been shot clandestinely, in the bedroom of Mr. Reilly’s apartment in Shanghai. Analysts working for the company said it had been edited to disguise the location.
Glaxo executives in London were shocked. They deemed the video a serious breach of privacy, involving a possible break-in at the home of a senior executive in China. Mr. Reilly moved to a more secure residence.
Like many global companies, Glaxo has a code of conduct that encourages employees to report fraud or wrongdoing without fear of retaliation by the company. In many countries, including China, the rights of whistle-blowers are protected by law.
Glaxo didn’t seem to care.
By the time the video surfaced, Glaxo already had its suspicions about the identity of the whistle-blower. Months earlier, the company had fired Vivian Shi, a 47-year-old executive handling government affairs in Glaxo’s Shanghai office. The official reason for Ms. Shi’s firing was falsifying travel expenses. In fact, she was dismissed because the company believed she was the whistle-blower, according to confidential corporate documents obtained by The Times.
Ms. Shi did not return multiple calls for comment.
After receiving the video, Glaxo took more aggressive action, seeking to discredit Ms. Shi, who had already left the company.
At that point, in the spring of 2013, the company turned to Mr. Humphrey, the investigator. He ran ChinaWhys, a small risk consultancy firm that advised global companies like Dell and Dow Chemical.
His firm was engaged in what he called “discreet investigations,” helping multinationals cope with difficult situations like counterfeiting and embezzlement. Short in stature, with a shock of white hair, Mr. Humphrey portrayed himself as a kind of modern-day Sherlock Holmes.
“He likes a good adventure and likes solving cases,” said his friend Stuart Lindley, who runs a financial services company in China. “But he was definitely aware that some of that stuff was risky.”
In April 2013, Mr. Reilly met with Mr. Humphrey at Glaxo’s glass office tower near People’s Square in central Shanghai. According to meeting notes obtained by The Times, they discussed the emails, the sex video and Ms. Shi, the suspected whistle-blower. Mr. Reilly told the investigator that she held a grudge against Glaxo.
At the meeting, Mr. Reilly asked the investigator to look into the break-in at his apartment. But he made clear that he also wanted to assess what power and influence Ms. Shi might have with the government.
Legal experts say Mr. Reilly should not have been put in charge.
“The executive so accused has an obvious conflict of interest in overseeing such an investigation,” said John Coates, a Harvard Law School professor. “Even if the executive were entirely innocent of the whistle-blower’s charge, giving that same executive the role of investigating the whistle-blower smacks of retaliation.”
Efforts to reach Mr. Reilly, who has since left the company, were unsuccessful.
Using the code name Project Scorpion, Mr. Humphrey and his staff spent the next six weeks working undercover, gathering evidence. They visited Lanson Place, the upscale apartment complex where Mr. Reilly lived when the sex tape was made. They created a dossier on the suspected whistle-blower, searching for motives and ties to high-ranking officials or regulators. They interviewed former co-workers, scrutinized her résumé and scoured the web for information about her father, a former health official.
Glaxo may have crossed a line in this regard, putting the company more sharply in the government’s sights.
As part of the investigation, Mr. Humphrey turned to a Chinese detective to acquire a copy of Ms. Shi’s household registration record, or hukou. The official document contained information about her husband and daughter. The authorities had warned private detectives about acquiring confidential government documents.
“This type of household information is supposed to be private,” said John Huang, a former government official who is now managing partner at McDermott, Will & Emery in Shanghai. “But people were buying and selling it.”
Glaxo got little payoff from the investigation.
On June 6, 2013, Mr. Humphrey delivered a 39-page report to Glaxo that said Ms. Shi was probably the whistle-blower and even had a “track record of staging similar attacks” at a previous job. But the report included no evidence linking her to the emails or the sex video, according to a draft obtained by The Times.
Glaxo’s strategy of bribery and discrediting ultimately failed.
With the Chinese government in the midst of a crackdown on corruption, the police carried out a series of raids on June 27, 2013. They seized files and laptops from multiple Glaxo offices and interrogated dozens of employees. In Shanghai, four senior executives were detained. Investigators also raided the offices of several travel agencies that had worked closely with Glaxo, including China Comfort Travel.
A week later, the police stormed Mr. Humphrey’s apartment in Shanghai. He and his wife were charged with violating privacy laws.
Mr. Humphrey declined to comment on the specifics of the Glaxo case. His son defended his work, saying Glaxo engaged him “under false pretenses.” “My father is an honorable and law-abiding man,” said the son, Harvard Humphrey.
When prosecutors announced the case against Glaxo in July 2013, several weeks after arrests began, their allegations closely mirrored those of the whistle-blower. They described an elaborate scheme to bribe doctors and workers at government-owned hospitals using cash that had been funneled through a network of 700 travel agencies and consulting firms.
“It’s like a criminal organization: There’s always a boss, and in this case GSK is the boss,” said Gao Feng, one of the lead investigators.
Glaxo said little about the developments until July 15, when several high-ranking executives confessed from prison on state-run television. After that, the company capitulated, issuing a blanket statement for its misdeeds: “These allegations are shameful and we regret this has occurred.”
Cleaning Up Corruption
Dressed in a dark suit and a blue tie, Mr. Reilly, the Glaxo executive, was led in handcuffs into a small courtroom in the city of Changsha, in central China, in September 2014. With security guards behind him, he stood alongside four other senior Glaxo executives as a judge read the charges.
“The defendant company GSKCI is guilty of bribing nongovernment personnel and will be fined 3 billion yuan,” the judge, Wu Jixiang, said sternly, referring to Glaxo’s Chinese name. The company and the executives, having confessed, were given relatively light sentences, the court said.
Mark Reilly was sentenced to three years in prison and ordered to be expelled from China.
After handing down that sentence, the judge turned to Mr. Reilly.
“Do you obey the court’s verdict? Do you appeal?” he asked.
Mr. Reilly said that he would not challenge the verdict. Because he was swiftly deported, he will not serve prison time in China.
Glaxo is still trying to clean up the mess.
In China, Glaxo has promised to overhaul its operations and has put in place stricter compliance procedures. The company has changed the way its sales force is compensated and has eliminated the use of outside travel agencies.
Glaxo has also tightened oversight of expenses and cash advances, areas central to the case. Employees must now send in photographs of the guests and food, to verify that the meetings took place.
And in August 2015, Glaxo tried to make amends by rehiring Ms. Shi, an acknowledgment that the company had erred in firing an employee suspected of being a whistle-blower.
But the decision also hinted at a more troubling admission — that Glaxo had targeted the wrong person. There are indications that Ms. Shi was not the whistle-blower, and that there may have been more than one person.
The emails sent to regulators were written in fluent English and came mostly from a Gmail account. The email with the sex video came from a local Chinese account and was written in poor English. The only similarity was the anonymity.
The Times sent emails to both accounts and got a response from just one, the person who had written the detailed emails to the Chinese authorities and Glaxo. “You have reached who you are looking for,” the person replied.
In a series of exchanges, the author denied being Ms. Shi, acting in concert with her or sending the video. The person said Glaxo had erroneously blamed Ms. Shi for the emails and never found the actual whistle-blower.
The Times was unable to verify the identity of the person, who described working in Shanghai but declined to come forward for fear of retribution.
“I didn’t reveal to GSK personnel that I was the whistle-blower because doing so would have placed me in potential physical jeopardy,” the whistle-blower wrote in an email to The Times. “You understand that criminals — you know that they were convicted later in Chinese courts — were in charge of GSK China at that time, and I truly believe that they would have harmed me in some fashion had they discovered my identity. ”
After a whistle-blower working for one of the world’s biggest pharmaceutical companies began sending anonymous tips about fraud and corruption inside its operation in China, authorities there moved in. They arrested top executives and corporate detectives the company had hired to track down the whistle-blower. Here is how the events transpired.
Credit Aly Song/Reuters
December 2011 A self-described whistle-blower working inside Glaxo sends an email to Chinese regulators, detailing fraud and corruption in the pharmaceutical maker’s Chinese operations. It is the first of about two dozen emails sent over a 17-month period.
April 2012 Glaxo executives in China begin hearing that a whistle-blower has been sending documents to Chinese regulators claiming widespread corruption at the company.
July 2012 The company pleads guilty in the United States to criminal charges for improper drug marketing and kickbacks to doctors. The company’s chief executive, Sir Andrew Witty, pledges that it “is never going to happen again.”
December 2012 Vivian Shi, the head of government affairs for Glaxo in China, is fired, supposedly for falsifying travel expenses. But the real reason, according to internal documents, is that Ms. Shi is suspected of being the whistle-blower.
January 2013 The whistle-blower sends a 5,200-word email to the Glaxo chairman, senior executives and the company’s outside auditor. The email, like the previous ones to authorities, describes a systemic fraud and bribery scheme. The allegations are dismissed by the company as a “smear campaign.”
“This illegality almost killed a person,” a whistle-blower wrote to Chinese regulators in January 2013.
March 2013 Top Glaxo executives in London receive another whistle-blower email, this time showing Mark Reilly, the head of the company’s operations in China, engaged in a sexual act in his apartment.
April 2013 Glaxo hires ChinaWhys, a private consulting firm run by Peter Humphrey and his wife, Yu Yingzeng, to investigate the suspected whistle-blower and a break-in at Mr. Reilly’s home. The investigation is code-named “Project Scorpion.”
June 2013 Mr. Humphrey presents the findings of his investigation to Glaxo. Although his report offers no evidence connecting Ms. Shi to the emails, he notes the suspected whistle-blower has a “track record of staging similar attacks.”
June 2013 The police carry out a series of coordinated raids on Glaxo offices throughout China, detaining four executives, including the country’s chief legal officer. Several travel agencies working closely with Glaxo are also raided.
July 15, 2013 At a news conference in Beijing, prosecutors accuse senior executives at Glaxo’s Chinese operations of running an elaborate scheme to bribe doctors and hospital workers, describing it as an “organized crime operation.”
July 16, 2013 Four Chinese executives at Glaxo confess on state television to the bribery and fraud scheme.
August 2014Mr. Humphrey and Ms. Yu are convicted of illegally obtaining government records about individuals during their corporate investigations, a charge they denied. They each served two years in prison.
Sept. 19, 2014 At a one-day trial held in secret, Mr. Reilly, the head of Glaxo’s Chinese operations, and other company executives plead guilty to fraud and bribery. Glaxo agrees to pay a $500 million fine. Mr. Reilly is deported from China.
The U.K. pharmaceutical giant GlaxoSmithKline has resolved an outstanding FCPA matter for the conduct of its China subsidiary, GSK-China that settled an SEC investigation for a fine of $20 million, with no profit disgorgement—quite a favorable move for the company. Even more amazingly, the company received a declination from the Justice Department, even though it was under the equivalent of a Deferred Prosecution Agreement, called a Corporate Integrity Agreement, for the actions unrelated to its FCPA violations in marketing off-labeled marketed products.
Of course these resolutions did not stand alone as the company had been sanctioned by the Chinese government with a fine of approximately $490 million back in 2014 for the actions of GSK-China. Company employees were criminally convicted and non-Chinese senior executives of the China business unit, who were convicted were deported from China. GSK’s sales in China went in the tank and continue to suffer through this date.
Perhaps the U.S. authorities felt the company had suffered enough. However, in this age of increasing international enforcement, it may well be the SEC and Justice Department missed an opportunity to demonstrate how they would give credit for anti-corruption prosecutions, done by other governments, under local anti-corruption laws; such as was done by Chinese authorities with GSK-China. U.S. authorities could have not only cited to the successful use of domestic Chinese laws as an example in the international fight against bribery and corruption but also specifically stated that how the fine and penalty paid by GSK-China was considered in the calculation of the fine by U.S. regulators.
Such an approach would have emphasized the U.S. government’s favorable outlook for greater international sanctions against corruption, as well as shown companies that they would not be whip-sawed by regulators across the globe for the same conduct. It could have been one of the most public examples of how the U.S. government viewed the international fight against corruption.
“…Britain’s Serious Fraud Office has launched a formal criminal investigation into GlaxoSmithKline’s sales practices, piling further pressure on the drugmaker which is already being investigated by Chinese authorities and elsewhere amid allegations of bribery.
Britain’s biggest pharmaceutical company, run by Sir Andrew Witty, said it had been informed on Tuesday that the SFO had “opened a formal criminal investigation into the group’s commercial practices”.
“GSK is committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO,” it added. A spokeswoman was unable to give further information. It is understood the SFO is looking at possible patterns across numerous global jurisdictions including China.
Under the 2010 Bribery Act, the SFO has powers to investigate and prosecute corruption at home or abroad. In some circumstances companies can be considered for immunity from prosecution if they can demonstrate they have been proactive and alerted SFO investigators to evidence of wrongdoing as soon as they found it…”
Following on from my post two days ago (about Erika Kelton-Whistle-Blower attorneys’- article on GSK CEO Andrew Witty in Forbes online), GSK whistleblower Greg Thorpe left some interesting comments on it. (see here)
I have long thought that GSK’s 3 Billion dollar fine gave merely the appearance of justice-to the media and the public- but didn’t really deliver it at all. The only ones that really benefited from this 3 Billion dollar fine were the many attorneys involved and GSK themselves. Patients did not get justice, many people were harmed and some died. There was no real justice for those harmed.
On the surface of it, it seems like a lot of money, and a big fine, but 3 Billion is nothing to GSK, it’s around 3 months profit, and in any case- the profits that they made -pushing the various drugs detailed in Greg’s complaint off label- over the decade that the case was (unethically) sealed-and the years previous (to when Greg raised the alarm) more than made up for the criminal behavior that GSK were fined for anyhow.
As Greg so perfectly put it- this fine was a ‘gift’ to GSK.
Disturbingly also, GSK were then fined 2 years later (500 million) in the biggest corporate bribery scandal in China. It seems that GSK broke its corporate integrity agreement (one of the main stipulations for GSK’s fine with the US department of Justice) literally less than 2 years after it signed it. Was GSK setting up this bribery network during the time it was signing this corporate integrity agreement with the US department of Justice? Who was overseeing the funding of GSK’s elaborate bribery scam? that’s something that journalists and the media should be researching to find out…
Personally, I don’t think that GSK will be brought to justice in the UK, or the US, for any of this extremely unethical and immoral behavior. GSK operate above the law because they are a cash cow for the UK economy; they are hugely influential over politics, healthcare, universities, and the media- globally. They are an unimaginably profitable company, and their stranglehold upon powerful people, and organizations around the world (from political sway to university/academic control), stretching back about a century, keeps them protected from facing justice for any of the crimes that they commit.
GSK epitomize an evil, untouchable, unaccountable corporate entity that has influence and power beyond our imaginations. They get away with corporate fraud, bribery, harm to patients (and often corporate manslaughter of patients) because the governments and justice systems (particularly, in the UK, Europe and US) are nefariously influenced by GSK’s huge financial, legal and corporate power. They have every facet of society in their pocket…
Like big oil and the military industrial complex, the big banks etc, Big Pharma’s like GSK are literally untouchable. From time to time they face paltry, meaningless, fines, such as the department of Justice charade- however their corporate culture remains the same.
They hire people like Andrew Witty to become the face of their new branding strategy, but they never ever atone for many of the crimes that they commit.
At the end of the day, it’s all about money and greed…
In this corporate dominated world, the individual is considered value-less and disposable..
The average joe, on the street; the ordinary consumer or patient- has little or no power, to fight these kinds of corporations. If big oil destroys the environment, it doesn’t have to face any real justice, if the military industrial complex wants to fund wars in the middle east, leading to deaths of innocent people in those areas, maiming and dismembering kids and women, and men- it’s allowed to, and if Big Pharma wants to sell a dodgy drug to you, and lie about side effects, and even kill you and get away with it, it’s allowed to do this without proper recourse.
The CEO’s of these entities, are so rich, and well protected by the high political, legal and professional class, that they can simply do what they please, and at the end of their tenure, they can ride off into the sunset with multi-million pound nest eggs and golden parachutes. It doesn’t matter what the corporation does while the CEO is in charge, even if the company commits fraud continually, and pushes drugs off-label to people harming them and sometimes killing them- the CEO’s are let off the hook…
They are untouchable…
We are at their mercy, and they have no mercy..
They behave sociopathically because that’s the nature of how they do business. Despite protestations of new ethical branding, they are unable to change because the corporate environment in which they thrive doesn’t allow for humane characteristics.
If GSK think that I am wrong about anything that I have written on my blog, I am open to amending any blog post to set the record straight, and furthermore I would be happy to discuss any of the issues raised on this blog with Andrew Witty, the CEO, of GSK anytime and anyplace (as long as its recorded and released to the public) so there you go Andrew, take me up on that offer anytime you wish- and show the world that GSK are really concerned with ‘patients first’ and ‘transparency’ – prove to the world that you’re not the corporate lackey that we all think you are…
Erika Kelton and her so called whistleblowers are frauds, period.
Kelton told me specifically in a letter that “Off label marketing is not fraud”.
Her firm would not take this case until they found out I was right. Both her me too whistleblowers were terminated GSK employees and Matt Burke was terminated for off label promotion as a Regional Manager, forcing some 200 plus representatives under him to do the same.
This was AFTER I went to the highest ranking people in the company, complaining of off label fraud and kickbacks.
These clones of me used much of the same information I sent Kelton…only to file a separate case about 4 months AFTER I had to get some rookie counsel to represent me.
Her version of the story and their statements are not only false and misleading but probably defamatory to my position on the case. The Department of Justice gave ME standing as first to file and my attorneys handled the award.
The award was decreased to the minimum largely because her “me too” terminated clients were actually deemed ” planners and initiators ” of the Fraud.
This was a 9 year joke, and that is the time it took the DOJ to decimate my complaint and reduce it from some 350 pages with 750 exhibits to some 80 pages or so of a huge quid pro quo to GSK.
I have a lot more to say on this and it was largely Kelton and her boys inaction and lack of substance on the major drugs…Paxil, Imitrex, Zyban and Wellbutrin that the settlement was so paltry.
The settlement amounted to 3 months of PROFIT for GSK. It makes me sick, and Kelton declares victory ? I call bullshit.
Criminal actions no doubt occurred over these 9 years including an illegal seal from the public on the case….9 years !! Sara Bloom, Kelton’s buddy was lead investigator and seemingly spearheaded the Gift to GSK. I have questions as to the role of Eric Holder also in this whole charade.
A GSK defense attorney became Attorney General 5 years into the case. He supposedly recused himself, but there are indications he had his moles in the DOJ putting the clamps on any criminal indictment…let alone the insanely low penalty. Hundreds of thousands of patients were killed or suffered…nothing done. A slap on the wrist. Holder is now back at the same law firm, DEFENDING GSK. Anyone smell the RAT ?
I have a lot more intimate knowledge about all of this…and have already been threatened for coming forward.
I was the ONLY whistle-blower who was wrongfully terminated for coming forward.
So Erika until you can stop lying and putting lipstick on this pig of a case…that cost the taxpayers Tens… if not hundreds of millions of dollars…
I suggest you keep your mouth shut and comply with my request to show how you really handled the information I first gave to you…when you would not file, and declared in writing that “OFF LABEL DETAILING IS NOT FRAUD”…. It certainly is, especially when people die because of statements made to physicians, even by your own so-called whistle blowers
To Forbes …..
If you want the truth about this whole incredible 9 year quid pro quo….I will give you the truth, and not in some self serving article put forth to generate business for a lawfirm.
The article makes me want to puke. You will get the whole truth from me, not just what some me-too attorney wants you to believe.
Truth man, why don’t you publish the letter to me from Kelton ? Says it all on her integrity and real role in the case on the “killer” off label promotion…not some innocuous promotion on Advair for mild asthma, which in most cases helped patients….which she lays claim to…..having nothing on Imitrex, Paxil, or Avandia.
The really harmful drugs. A useless pawn, and I have the evidence, including HOW she got into the case, and it was not because of the DOJ at all initially.
Get real Erica, you can’t hide the real truth on this Government Fraud forever. That is the bottom line.
The truth will come out, and not in a few paragraphs here…sooner or later.
One other note, Kelton insists that GSK listen to internal whistleblowers.
Certainly I agree…however this is coming from an attorney and a lawfirm who would not listen to the only internal whistle-blower in the 3 Billion dollar gift.
Maybe Erica should take a little of her own advice..instead of only listening to terminated employees, planners and initiators of the Fraud, then claiming THEY
were the leading whistleblowers.
They both secured good jobs outside the company and lived the good life for ten years….while I went through hell for reporting while employed, then was subject to wrongful termination after almost 25 years with the company.
Really Erika…you can fool some of the people some of the time..as the saying goes.
Matt Burke, your main bread and butter, as you know… would not even put his name on the complaint until I forced him to do so, or hit the road. Some hero ?
Come clean, seriously…it is about more than generating business for your firm through false and misleading statements. Bottom line you and your clients only got in the way in this case, especially in settlement discussions. The truth hurts, huh ? If I am wrong Burke can reply….but he will not.
He was grossly unjustly enriched and could be in prison, instead of living the good life off of my initial complaints.
The high-profile fund manager tells Sky News a “fresh pair of eyes” is needed to replace Sir Andrew Witty at GSK.
10:58, UK, Thursday 17March 2016
Sir Andrew Witty poses after being honoured with a knighthood
By Mark Kleinman, City Editor
Britain’s biggest drugs-maker, GlaxoSmithKline (GSK), has been told to ignore internal candidates in its search for a new boss as shareholders intensify demands for a radical overhaul of the company.
Speaking exclusively to Sky News, Neil Woodford, the City’ s best-known fund manager, said that GSK needed “a fresh pair of eyes” to replace Sir Andrew Witty, who will step down next year.
“I have a strong preference for an external candidate,” the head of investments at Woodford Investment Management said on Thursday.
Mr Woodford’s demands will put pressure on Sir Philip Hampton, GSK’s new chairman, to appoint an executive from elsewhere in the pharmaceuticals industry to succeed Sir Andrew.
That would come as a blow to possible internal candidates such as Emma Walmsley, who runs GSK’s consumer products division, and Abbas Hussain, president of its global pharmaceuticals unit.
Sky News revealed last autumn that Mr Woodford was seeking a break-up of the £69bn company, which owns brands such as Nicorette and Horlicks.
He believes the group would be far more valuable if it separated its HIV business ViiV, its consumer healthcare division and Stiefel, its dermatology division, from its core medicines and vaccines arm.
The City has grown frustrated at GSK’s lacklustre share price performance, with the stock down about 10% over the last 12 months as investors wait to see whether a pipeline of promising new products will deliver.
Under Sir Andrew, its chief executive since 2008, GSK has signalled a shift away from highly priced prescription drugs in favour of vaccines and consumer products.
Analysts at Deutsche Bank said the announcement about Sir Andrew’s retirement was unlikely to signal material strategic changes at GSK.
GlaxoSmithKline CEO Andrew Witty to Retire in March 2017
March 17, 2016 — 7:12 AM GMT
Updated on March 17, 2016 — 12:10 PM GMT
Board will search for CEO candidate inside, outside drugmaker
Chairman Hampton also plans `board refreshment’ this year
GlaxoSmithKline Plc Chairman Phil Hampton began an overhaul of the biggest U.K. drugmaker by launching a search for Chief Executive Officer Andrew Witty’s successor and replacing a third of the board as he seeks to pacify some disgruntled investors.
Witty, 51, will retire next March, after almost a decade at the helm, the London-based company said in a statement on Thursday. Glaxo also plans what Hampton termed a “board refreshment” as directors Deryck Maughan, Stephanie Burns, Daniel Podolsky and Hans Wijers won’t stand for re-election at the annual meeting in May.
Photographer: Simon Dawson/Bloomberg
Witty, once hailed as one of the pharmaceutical industry’s most visionary managers, has faced criticism for Glaxo’s lagging share performance, sluggish sales and a pipeline lacking promising medicines. A bribery scandal in China that led to a $489 million fine last year also tarnished his image, which he had built with initiatives to develop the world’s first malaria vaccine and reform the way medicines are marketed to doctors.
“Glaxo needs a shakeup at the top,” said Gareth Powell, a portfolio manager at Polar Capital LLP in London whose holdings include Glaxo shares. “There’s a lack of truly innovative products, and that’s what they need to sort out.”
Last year, Witty oversaw the biggest reorganization since the merger that created Glaxo 15 years ago. He sold the company’s cancer drugs to Novartis AG in exchange for the Swiss firm’s vaccines business and cash. The companies also formed a joint venture, controlled by Glaxo, to sell consumer health products.
Glaxo shares fell 1.3 percent to 1,394 pence at 12:07 p.m. in London trading. The stock has returned an average of 10 percent a year over the past five years, compared with a 17 percent average annual return for the Bloomberg Europe Pharmaceutical Index.
“By next year, I will have been CEO for nearly ten years and I believe this will be the right time for a new leader to take over,” Witty said in the statement. He began leading Britain’s largest drugmaker in 2008 after more than 20 years at the company, including postings in the U.S., Asia and Africa.
Both internal and external candidates will be considered for the role. Glaxo investor Neil Woodford said he would like to see someone from outside the company take the top job. One of that person’s first tasks may be to slash the dividend, investors said.
Potential candidates include Emma Walmsley, head of Glaxo’s consumer-health division, and Abbas Hussain, president of its drug business, according to reports in U.K. media. Chief Financial Officer Simon Dingemans and Roger Connor, who oversees global manufacturing and supplies, may also be considered as internal successors. David Epstein, head of Novartis’s pharmaceutical unit, may also be approached, the reports said.
Witty’s views have diverged from those of his peers. He has avoided large-scale acquisitions that have consumed others such as Pfizer Inc. and Teva Pharmaceutical Industries Ltd. And in 2011, he started a program called Patient First that eliminated the link between sales targets and bonuses for Glaxo’s U.S. marketing team, following allegations of illegally promoting drugs. Few drugmakers followed his lead.
Glaxo’s sales declined to 23.9 billion pounds ($34.2 billion) last year from a peak of 28.4 billion pounds the year after Witty joined. Core earnings per share will probably surge this year, the company has said, after two years of declines.
“The decision will allow him to step aside at a high point following the company’s expected return to double-digit earnings growth in 2016,” Richard Parkes, an analyst at Deutsche Bank AG in London, wrote in a note to clients.
One bright spot has been Glaxo’s portfolio of HIV medicines, which the company considered spinning off in an IPO before opting to keep it. The British drugmaker also has one of the broadest drug pipelines in the industry, with more than 70 new medicines in development (though many are early-stage drugs that won’t deliver sales anytime soon), according to a Bloomberg Intelligence pipeline analysis.
A breakup of the company, favored by some investors including Woodford, might not generate that much value, according to an analysis by Bloomberg Intelligence analyst Sam Fazeli. Separating the drugs, vaccines and consumer-health units will probably increase Glaxo’s enterprise value of 83 billion pounds ($118 billion) by 10 percent or less, he estimated.
After months of anticipation, a Chinese court found the GlaxoSmithKlineGSK.LN+0.90% subsidiary in China guilty of bribing doctors, hospital officials and other non-government personnel, and fined the drug maker more than $490 million, The Wall Street Journal reports. This becomes the largest such penalty levied on a company in China.
At the same time, Mark Reilly, the former head of the Glaxo unit in China, pleaded guilty to bribery-related charges and was given a three-year suspended sentence. There are varying reports, however, whether he will be deported or required to remain in China during that time. Four other senior Glaxo managers in China also received suspended sentences of between two and four years.
As we have noted previously, the drug maker had been accused of running a bribery network in China that was designed to boost drug sales. As part of the scheme, Glaxo employees allegedly bribed physicians and hospital staff members, while channeling kickbacks through travel agencies and trade groups, among others.
The court decisions cap a tumultuous episode for Glaxo, which was already struggling to restore its image and revamp business practices in the wake of a $3 billion settlement with U.S. authorities two years ago. The drug maker had been accused of failing to disclose clinical trial data for certain medicines and improperly marketing drugs, among other things.
Andrew Witty, the Glaxo chief executive, issued a brief statement: “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.” (here is the official apology, too).
Despite the contrition, pressure may be mounting on Witty, who has repeatedly emphasized the China and other so-called emerging markets are key to Glaxo growth. As the Journal points out, some investors are starting to question his overall performance and whether the scandal in China may represent a systemic problem.
Indeed, Glaxo previously acknowledged investigating claims employees bribed doctors in Poland, Iraq, Syria, Jordan and Lebanon. Meanwhile, the FBI and the U.S. Securities and Exchange Commission are probing its activities in China. As part of a probe into the pharmaceutical industry, U.S. authorities have been eyeing its overseas dealings since 2010 for possible violations of the Foreign Corrupt Practices Act.
It is worth noting that Witty has now spent half of his six-year tenure trying to overhaul business practices, and has still more fines and investigations to show for his efforts. Granted, cultural differences require varying approaches to success around the world, and Glaxo is not the only drug maker facing this challenge. But Glaxo is now something of a poster child for scandal.
Witty has made headway in other areas. In particular, he has won kudos for his push to make clinical trial data more readily accessible to researchers, a move that has helped Glaxo deflect much of the criticism leveled at the pharmaceutical industry otherwise. In trying to resolve this highly contentious issue, he placed himself and Glaxo in a leadership position.
Whether he emerges unscathed by the latest developments in China – and unfolding events elsewhere – remains to be seen, of course. But Witty may need to have Glaxo executives practice some of the self-criticism that Chinese Communist Party leaders preach as a path toward rehabilitation.
GlaxoSmithKline (GSK) has been fined almost £300m by a court in China – a record in the country – for bribing health officials to use its products.
The pharmaceutical firm confirmed the £297m penalty imposed by the Changsha Intermediate People’s Court in Hunan Province, saying it accepted that illegal activities took place and the fine would be paid through existing cash resources.
The Chinese state news agency, Xinhua, reported that the former head of GSK in China and other executives faced jail terms but a GSK source told Sky News that Mark Reilly was to be deported after being handed a three-year suspended sentence.
The company’s statement said the court found that “GSK China Investment (GSKCI) …offered money or property to non-government personnel in order to obtain improper commercial gains.
“The illegal activities of GSKCI are a clear breach of GSK’s governance and compliance procedures; and are wholly contrary to the values and standards expected from GSK employees.
“GSK has published a statement of apology to the Chinese government and its people on its website.
“GSK has co-operated fully with the authorities and has taken steps to comprehensively rectify the issues identified at the operations of GSKCI.
“This includes fundamentally changing the incentive programme for its salesforces (decoupling sales targets from compensation); significantly reducing and changing engagement activities with healthcare professionals; and expanding processes for review and monitoring of invoicing and payments.”
GSK chief executive Sir Andrew Witty added: “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 investigation took a number of twists with a British man, who was hired as an investigator by GSK, being jailed for two years and six months in August.
The Chinese authorities claimed Peter Humphrey illegally obtained Chinese citizens’ personal information and sold it to companies including GSK.
The London-listed firm hired him after an anonymous email, containing a sex tape of Mr Reilly and his Chinese girlfriend, was sent to senior management in January last year.
The email alleged corrupt practices in GSK’s China operation.
GSK’s ethical standards have also been called into question in Lebanon, Iraq, Jordan,Syria and Poland.
For the past year, the GlaxoSmithKlinebribery scandal in China has centered on its pharmaceutical business, but newly reviewed documents indicate the drug maker became aware of compliance issues in its consumer health care business as early as 2012, according toReuters.
Glaxo confirmed that it conducted an internal investigation into procurement practices in the consumer unit in China, the news service writes. Although the drug maker tells Reuters there was no sign of “unethical conduct,” it did find “some non-compliance with our procurement procedures.” Glaxo says the inquiry was unrelated to a Chinese criminal investigation into corruption in its pharmaceutical division, which was made public last year.
The investigation focused on specific people and suppliers in China – including some employees, academics and education institutes – and was related to a U.S. Department of Justice and U.S. Securities Exchange Commission inquiry into possible violationsof the Foreign Corrupt Practices Act, according to Reuters. The law targets illegal payments to foreign government officials used to boost sales.
The news service, which wrote that it reviewed three internal Glaxo notices, stressed that the documents do not amount to evidence of wrongdoing by Glaxo or its business partners. The notices were sent by Glaxo lawyers to employees and e-mailed to senior Glaxo staff in China, according to Reuters, which adds that the drug maker has since cut ties with some suppliers.
A Glaxo spokesman tells Reuters that the notices “related to allegations around adherence to procurement policies within our Chinese consumer healthcare business. We investigated using resources inside and outside the company, and did not find evidence of unethical conduct, but did identify some non-compliance with our procurement procedures and remedial action was taken.”
The disclosure raises questions about Glaxo operations in China that had not previously been in the public spotlight. The drug maker, you may recall, has been coping with turmoil ever since bribery allegations surfaced in China, which is a large and growing market not just for Glaxo, but the entire pharmaceutical industry.
As reported previously, Chinese authorities recently accused the former head of Glaxo operations in China of ordering subordinates, his sales team and other employees to bribe hospitals, health care organizations and others. Separately, the drug maker said it is investigating claims that its employees bribed doctors in Iraq, Syria, Jordan and Lebanon.
Glaxo has previously acknowledged that some of its Chinese executives may have broken the law, but has maintained there is “zero tolerance” for bribery. We asked Glaxo for comment about this latest report and will update you accordingly.
“Why did Chinese authorities choose GSK? Such corruption is common practice in Chinese pharmaceutical companies, partly due to low salaries for doctors. The Chinese authorities appear to be holding onto the affair tightly, leading to speculations of political motives.
These speculations have arisen from the company’s links with Betsy Li Heng, a former director of GSK’s corporate affairs. Li’s two brothers, Hu Deping and Hu Dehua, have long been advocating political reform – going so far as to criticise President Xi. This is almost unheard of amongst Chinese officials and intellectuals, and the scandal could be a warning for them”
GlaxoSmithKline’s bribery scandal in China might actually be about shutting up political reformers
“The theory floating around Beijing political circles and in internet postings is that when China’s top leaders were deciding which pharmaceutical company to go after, they settled on GSK because they could achieve two goals simultaneously. Not only have they warned the drug industry to clean up its act; they have also sent a message to the Hu family to pull their necks in. According to this theory, the real targets of the crackdown on GSK are two of Li’s brothers, Hu Deping and Hu Dehua, both of whom have been outspoken advocates of political reform.”
GSK, corruption and the Byzantine world of Chinese politics
“When asked whether GSK believes the ongoing bribery and corruption investigation is related to elite Communist party politics, a spokesperson declined to comment beyond confirming that Li had worked for the company from the mid-1990s until 2007.
Adding to suspicions that an orchestrated smear campaign is targeting the Hu family, a series of anonymous internet postings claiming that Hu Deping owns at least one luxury apartment in central Beijing have also appeared in recent weeks.
Hu has denied that he owns the apartments.
Last week, allegations of “suspected massive corruption” were levelled by a senior state-employed journalist against a major state-owned conglomerate that previously employed another Hu Yaobang son, Liu He.
Liu was vice-chairman of Hong Kong-listed China Resources Group, the company named in the allegations, until his retirement in 2005. His retirement pre-dates the alleged corruption.
There has been a string of whistle-blowers exposing official corruption in recent months but it remains extremely rare in China for journalists at state media organizations to make such public accusations.”
“Major web portals have also linked to a story about a statement that is said to have been authored by Betsy Li Heng, the daughter of former Chinese Communist Party leader Hu Yaobang. The statement, which was posted to a Weibo account, refutes rumours about her private life and clarifies her association with GlaxoSmithKline. (SCMP)”
‘Betsy Li Heng, the daughter of former Chinese Communist Party leader Hu Yaobang, has dismissed rumours about her private life and her association with GlaxoSmithKline, a pharmaceutical conglomerate currently under criminal investigation in China for bribery, according to an online statement.
The allegations are the latest in a series of adverse reports circulating online on the offspring of the reformist party elder, whose death triggered the Tiananmen protests in 1989.
Li served as director of GSK’s corporate affairs in its Beijing office from the mid-1990s to 2007. Her departure from the company predates the alleged acts of bribery by the company in China.
Li also denied she had a daughter who was studying in Britain. “Ms Li Heng does not have a daughter,” the statement reads. “Rumours are a tool to hurt people.”
The unsigned statement, which could not be independently verified, is dated July 27 and was first shared on the official Sina Weibo account of KDNet, a popular forum for political debate, on Monday.
Li, who adopted her mother’s surname, also said she and her husband Liu Xiaojiang did not own luxury villas in Beijing downtown and in the Xiangshan mountains west of Beijing, as claimed in online posts. Photos of a purported residence had circulated online earlier in July.
Her brother Hu Deping, a member of the Chinese People’s Political Consultative Conference, also dismissed online allegations of owning a luxury property in Beijing, which appeared around the same time.
Hu said that his father’s descendants had nothing to hide, but the publication of the family assets should be made in an orderly manner.
At the same time, Xinhua journalist Wang Wenzhi accused China Resources, a Hong Kong-listed company, of “massive corruption”, in a rare exposure by journalists of the state-run news agency.
Observers noticed that Li’s other brother Liu Hu served as a former deputy general manager and executive board director for the company until his retirement in 2005.
For Wang Jiangsong, a philosophy professor at the China Institute of Industrial Relations in Beijing, these attacks have been orchestrated by opponents of the Hu family.
“It is probably extreme conservatives trying to blacken their names,” he said.
Days ahead of the leadership transition in the Communist Party in autumn, Hu’s eldest son Hu Deping wrote an open letter calling for reform and for policies that conform more to the country’s constitution.
“Constitutional rule is an abhorrence to both [the Communist Party’s] extreme right and left wing,” said Wang. “The Hu family represents healthy forces within the party.”
“The influence and appeal of them openly parading the banner of constitutionalism is no trivial matter,” he said. “Therefore, they had to be politically ruined and discredited among the people.”
Among the four hundred people who have commented on the statement on microblogs, many have expressed similar suspicions about a smearing campaign and expressed support for the family. Some have questioned the veracity of the statement.
Hu Deping could not be reached for immediate comment.