Law360, New York (November 22, 2016, 3:11 PM EST) — An Illinois federal judge on Monday canceled a pretrial hearing scheduled to vet an expert witness for the widow of a former Reed Smith LLP partner who killed himself allegedly as a result of taking GlaxoSmithKline PLC’s antidepressant drug, finding that the expert’s past issues had already been settled.
Dr. David Healy, who’s set to testify on behalf of widow Wendy Dolin when her trial against GSK begins in January, was scheduled first to take part in a pretrial hearing regarding an investigation into a past patient incident by the General Medical Council, the governing board of medicine in the United Kingdom where his practice is located.
However, that investigation has since closed with no finding of wrongdoing, and the Illinois federal court’s in camera review of documents related to the council’s inquiry have turned up nothing either, therefore a hearing to vet Dr. Healy is no longer warranted, U.S. District Judge William T. Hart decided.
“As stated by this court before the GMC investigation was closed ‘investigations, without finding of culpability, are typically not relevant.’ Moreover, there is nothing in the in camera documents to warrant a hearing or disclosure of the documents. Accordingly, no pretrial hearing of Dr. Healy’s testimony will be held,” Judge Hart wrote.
The judge indicated that the court would hang onto the in camera documents until the conclusion of the trial, which is set to begin Jan. 17.
“This case is about Paxil-induced self-harm, not a medical board investigation where Dr. Healy was cleared of any wrongdoing and had nothing to do with Paxil,” Robert Wisner of Baum Hedlund Aristei & Goldman PC, an attorney for Dolin, told Law360. “GSK wants to distract the jury with any and everything that does not center on GSK’s conduct. The court, thankfully, saw through it.”
A representative for GSK declined to comment.
Dolin had asked Senior U.S. District Judge James B. Zagel in August to cancel the December hearing over Healy after the General Medical Council cleared him in an investigation following the suicide of one of his patients.
Judge Zagel had requested the hearing to determine whether GSK could ask Healy about the council’s investigation in front of the jury during the upcoming trial. But Dolin had argued that GSK’s investigation-based attacks on Healy were no longer relevant to the case.
Dolin sued GSK and Mylan Inc. in 2012, two years after her husband, Stewart, threw himself in front of a train. He began taking Mylan’s generic form of GSK’s antidepressant Paxil just a few days before his death.
Wendy Dolin claims GSK covered up an increased risk of suicide associated with Paxil by manipulating data used in a study that was submitted to the U.S. Food and Drug Administration. She also wants GSK held liable for failing to include a warning on its packaging about the risk.
For more than a year now, the parties have battled over Healy, a British psychiatrist who will testify for the widow about his research into the causal relationship between Paxil and adult suicide. While under investigation by the council, Healy wrote on his blog that he was likely being targeted by major drug manufacturers like GSK because of his testimony in various cases against the companies.
After Judge Zagel ensured the case would go to trial by declining to rule on GSK’s summary judgment bids earlier this year, GSK pressed him to force Healy to reveal documents related to the council’s investigation, arguing they were relevant to Healy’s credibility and potential bias against the drugmaker. Dolin countered, saying the public filing of the documents could cost Healy his job.
Judge Zagel denied GSK’s efforts to get the documents, which were submitted to the court for in camera review, but said he wanted to hold a special hearing to determine whether the U.K. investigation is relevant to the Dolin case.
Dolin is represented by R. Brent Wisner, Michael L. Baum, Bijan Esfandiari and Frances M. Phares of Baum Hedlund Aristei & Goldman PC, and David Rapoport, Joshua L. Weisberg and Melanie VanOverloop of Rapoport Law Offices PC.
GSK is represented by Alan S. Gilbert and Anders Wick of Dentons LLP, Chilton D. Varner, Andrew Bayman, Todd Davis and Heather Howard of King & Spalding LLP, and Robert Glanville, Thomas Wiswall, Tamar Halpern and Eva Canaan of Phillips Lytle LLP.
The case is Dolin v. Smithkline Beecham Corp. et al., case number 1:12-cv-06403, in the U.S. District Court for the Northern District of Illinois.
— Additional reporting by Emily Field, Kat Greene and Diana Novak Jones. Editing by Ben Guilfoy.
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.
Former Glaxo scientists and the feds fight over reviewing allegedly stolen documents
By Ed Silverman @Pharmalot
July 18, 2016
A pair of former GlaxoSmithKline scientists, who were indicted earlier this year for allegedly stealing trade secrets and funneling the information to a company in China, is fighting with the federal government over their ability to stage a defense.
At issue is a protracted tussle over how the former scientists — and two of their compatriots — will be able to review millions of pages of documents and other evidence that will be used at their trials, but remain under government supervision while they do so.
And more than mere logistics are at stake, at least according to the feds.
In court documents, the US Department of Justice expressed worries that the former Glaxo scientists and their alleged accomplices may continue to funnel information to relatives in China, where the data could be sold. They already “plotted to hide their ill-gotten gains in the names of family members in China,” the feds wrote in a July 12 letter to US District Court Judge Joel Slomsky in Philadelphia.
Drug manufacturer GlaxoSmithKline, under investigation in China on suspicion its employees bribed doctors, said Thursday, July 18, 2013 its finance director for the country has been barred from leaving. The executive, Steve Nechelput, has not been questioned or arrested and is free to travel within China, the British company said in a statement. It said it had been aware of the travel restrictions since the end of June. Nechelput continues to work in his role as finance director for the company’s China unit. (AP Photo/Kirsty Wigglesworth, File)
Glaxo scientists indicted for stealing trade secrets
The feds are also concerned that the Glaxo data — which includes details on compounds, biological summaries, and a business plan for a quality control unit — might be transferred to still another accomplice. This fifth person, who was also indicted, is now a fugitive and is believed to be in China, where he is working for Renopharma, the company they established to market the data.
The case comes as the federal government is under pressure to pursue cases involving alleged theft of trade secrets belonging to US life sciences and tech industries. Not every effort succeeds, though. In 2014, for instance, charges were dismissed against two former Eli Lilly scientists, who were accused of wire fraud for allegedly leaking proprietary data about experimental drugs to a Chinese drug maker.
And so, the Justice Department wants to station security guards in the homes of the former Glaxo scientists and their alleged accomplices.
The “materials could be transmitted to (the fugitive) in a number of different forms including email, text messages, or other types of communication with little chance of detection. This fact heightens the risk of continued theft,” the Justice Department wrote. “The criminal prosecution has obviously put enormous financial pressure on the defendants, and there will be great temptation to attempt to profit from this information as they attempted to do so in the past.”
The defendants include Yu Xue, who worked as a research scientist at Glaxo and had access to a substantial amount of information concerning procedures for drug development and manufacturing. She and another former Glaxo scientist, Lucy Yi, allegedly emailed the data to others with whom they formed Renopharma, which marketed itself as an R&D company doing business in China.
Subscribe to our Pharmalot newsletter
Lawyers for the former Glaxo scientists have argued that security guards would be invasive and, instead, proposed that cameras be placed by stand-alone computers in set locations in each home. By doing so, the attorneys maintained the government could monitor the scientists whenever they review any documents. “The combination of these measures allows the government to reasonably ensure that nothing nefarious occurs with the … materials,” they wrote the judge in a July 1 letter.
But the feds countered that they don’t have the resources to continuously monitor the cameras; one camera could not adequately cover every possible angle, and cameras can malfunction or be bypassed. The feds are also worried that a stand-alone laptop could be stolen since the home addresses are now a matter of public record, and the information is known to be valuable. They also cite potential constitutional issues with constant videotaping inside their homes.
The judge is expected to issue a decision shortly, according to a spokeswoman for Robert Livermore, the US attorney in Philadelphia. A lawyer for Xue declined to comment.
Thanks to the U.S. Justice Dept. complaint in the suit recently settled by GlaxoSmithKline for a record $3B: http://www.justice.gov/opa/documents/gsk/us-complaint.pdf
–we can follow the history of this study in more detail, based on the internal GSK documents discovered during the proceedings, and see just how the data were manipulated for marketing purposes.
Study 329, directed by Dr. Martin Keller of Brown University, was one of 3 clinical studies in children and adolescents that were all interpreted by GSK scientists between August and October, 1998 to be discouraging. Study 329’s protocol specified two primary endpoints, and on neither measure did Paxil do better than placebo. The study also logged in 11 serious adverse reactions to Paxil, much more than in the placebo group, including 5 with agitated or suicidal behavior, the major risk for which eventually the FDA issued a black-box warning for the SSRI class of antidepressants…”
Editorial Note: Following the publication of Study 329 Restored, Martin Keller and his co-authors gave an initial response in which they said Nobody Pinned Anything on Us and also that they would respond in more detail later. It took four months for this response to appear. Our Response will follow in the next post and after that we will update our background correspondence with BMJ.
This and earlier correspondence and all the data from the Study 329, BMJ reviews of the study, a timeline of the history of SSRIs and all controversies linked to these drugs is all available on Study329.org.
There are two further Study 329 articles making Study 329 the most intensively studied Clinical Trial ever. The Study 329 website will make all this material available for anyone who wants to see how clinical trials operate – this study is not an anomaly, it is standard industry practice.
The picture above was dubbed Three Amigos by its creator. It features Charlie Nemeroff, Marty Keller and Alan Schatzberg. A picture that is at least as appropriate is below linked to the conflict of interest declaration.
Martin B Keller, Boris Birmaher, M.D., Gabrielle A. Carlson, MD, Gregory N. Clarke, Ph.D., Graham J. Emslie, M.D., Harold Koplewicz, M.D., Stan Kutcher, M.D., Neal Ryan, M.D., William H. Sack, M.D., Michael Strober, Ph.D.
attn: Martin B Keller, MD, 700 Butler Drive, Blumer 120, Providence, RI 02906, USA
Re: Restoring Study 329: efficacy and harms of paroxetine and imipramine in treatment of major depression in adolescence. Response from the authors of the original Study 329
The BMJ article entitled “Restoring Study 329: efficacy and harms of paroxetine and imipramine in treatment of major depression in adolescence” reanalyzed data from the original Paroxetine 329 study, a double-blind placebo controlled comparison of paroxetine to imipramine. Paroxetine 329 was designed between 1991 and 1992. Subject enrollment began in 1994, and was completed in 1997. Academic psychiatrists designed the study, with very little change by GSK, which funded the study in an academic / industry partnership. The goal of the study was to advance the treatment of depression in youth, rather than primarily as a drug registration trial.
Overarching issues with the “Restoring Study 329” include:
Authors of “Restoring Study 329” evidenced both bias and a lack of blind ratings. In a recent article about “Restoring Study 329” in the Chronicle of Higher Education, Dr. Jureidini is quoted as saying: “We don’t think we’ve done the definitive analysis. It’s not something that can be done absolutely objectively, particularly the interpretation of harms. We can’t protect ourselves completely from our own biases.” Biases are a serious consideration for Restoring Study 329 because Dr. Jureidini, as he declares in a Footnote on the subject of “Competing interests”, served as an expert witness for plaintiff’s lawyers in legal suites against GSK related to Study 329. In that work Dr. Jureidini would have studied all available data looking at both efficacy and suicidal side effects, using many different approaches to best capture any potential harms.
The “restoring invisible and abandoned trials” (RIAT) approach to reanalyzing published studies may provide general guidelines but we could not find publications or available working RIAT documents on detailed protocols. Lack of detailed methodology is a serious concern because there is general consensus in the field that there is not, nor never will be a single correct approach to reanalysis. Small differences in analysis frequently make big differences in statistical results and conclusions.
“Restoring Study 329” did not consider available knowledge 24 years ago, when Paroxetine 329 was developed and performed. Clinical research methodology has evolved considerably in the past two decades. These aspects are addressed in comments by established investigators not involved in Paroxetine 329. For example, Referring to “Restoring Study 329” as reported in Psychiatric News Alert  Mark Olfson said, “However, the new reanalysis does not alter the totality of clinical trial evidence that continues to support the safety and efficacy of SSRIs for adolescent depression.” And Daniel Pine said “We have known for some time that antidepressant medications have both significant benefits for some children as well as significant risks for other children. This new analysis really does nothing to change this knowledge, and provides no new insights into what we have known about these medications for the past few years.”
Antidepressants considered as a group are superior to placebo for the treatment of anxiety disorders and for depression in adolescents, with similar overall response rates in anxiety and depression. 
The two primary outcome measures in Paroxetine 329, did not reach statistical significance. The abstract of the published paper noted: (1), “The two primary outcome measures were endpoint response (Hamilton Rating Scale for Depression [Ham-D] score ≤ 8 or ≥50% reduction in baseline HAM-D) and change from baseline HAM-D score.” In Table 2, the p value for the first primary endpoint (Ham-D score ≤ 8 or ≥50% reduction in baseline HAM-D) was reported at p < 0.11 for paroxetine versus placebo. In the same table, the p value for change in HAM-D total score is reported at p < 0.13. While both outcomes were in the direction of a better response for paroxetine over placebo; neither reached our critical alpha level of 0.05. This is clear in the abstract and text of the publication.
In the interval from when we planned the study to when we approached the data analysis phase, but prior to the blind being broken, the academic authors, not the sponsor, added several additional measures of depression as secondary outcomes. We did so because the field of pediatric-age depression had reached a consensus that the Hamilton Depression Rating Scale (our primary outcome measure) had significant limitations in assessing mood disturbance in younger patients. Taking this into consideration, and in advance of breaking the blind, we added secondary outcome measures agreed upon by all authors of the paper. We found statistically significant indications of efficacy in these measures. These secondary outcomes were clearly reported as separate from the negative primary outcomes.
Thus, the authors of “BMJ-Restoring Study 329” were incorrect in stating that “Both before and after breaking the blind, however, the sponsors made changes to the secondary outcomes as previously detailed. We could not find any document that provided any scientific rationale for these post hoc changes and the outcomes are therefore not reported in this paper.” Rather, secondary outcomes were decided by the authors prior to the blind being broken. Secondary outcome measures are frequently, and appropriately, included in study reports even when the primary measures do not reach statistical significance. The authors of “Restoring Study 329” state “there were no discrepancies between any of our analyses and those contained in the CSR [clinical study report]”. The disagreement on treatment outcomes rests on this arbitrary and non-blind dismissal of our secondary outcome measures.
In the abstract we stated “Conclusions: Paroxetine is generally well tolerated and effective for major depression in adolescents.” In this sample and with the state of knowledge at the time, it was justified and appropriate.
Our goal was to learn as much as possible about the use of this compound in youth, so that we could understand what role it (and by extension other SSRIs) could play in the treatment of adolescents with MDD. For us the question was given (1) the data distribution and statistical results for efficacy and side effects that we saw in the study, and (2) that there was well replicated research evidence of efficacy and relative safety of paroxetine in adults, what conclusions should be drawn from our data? The clinical outcomes were substantially in the right direction, with a number of them reaching the 0.05 level of statistical significance. The clinical results comparing paroxetine placebo to and imipramine to placebo paralleled those reported in adults. Side effects were similar to what was known in adults. Thus we reached, the conclusions reported.
The “Restoring Study 329” reanalysis uses the FDA MedDRA approach to side effect data, which was not available when our study was done. That one can do better reanalyzing adverse event data using refinements in approach that have accrued in the 15 years since a study’s publication is unsurprising and not a valid critique of Paroxetine 329 study as performed and presented.
We emphatically disagree with the “Restoring Study 329” position that statistics are not useful in understanding adverse side effects and that each individual reader should decide for herself when a difference in rates of adverse side effects is meaningful. Statistics offer several approaches to the question of when is there a meaningful difference in the side effect rates between different treatments.
Specific methodology problems in the reanalysis of the “harm” data are as follows: 1) The authors choose a non-random subsample of 85 subjects who were withdrawn from the study plus 8 subjects whom the authors labeled “suicidal” based on their inspection of the data; 2) a different instrument was utilized to re-score the harm effects and only one of the authors was trained in the scoring of the instrument; 3) some side effects were arbitrarily interpreted (e.g., upper respiratory symptoms were labeled as “dystonia” and emotional lability labeled as “suicidality”); 4) in the original paper, side effects were analyzed only during the acute phase, but in the reanalysis, the authors analyzed them during the acute phase, as well as the tapering and follow up phases of the study; and 5) in the original study patients were interviewed face-to-face whereas the reanalysis was based only on the interpretation of the data; and 6) importantly, the two authors were not blind to patients’ randomization status.
Suicidal ideation and attempts
Our field’s understanding of how to approach analysis of suicidal ideation, suicide attempts, and completed suicide has advanced enormously since publication of study 329. Two definitive reanalyses of the suicidality with antidepressants in adolescents include: 1). The 2003 FDA reanalysis of all RCT data of SSRI studies in youth for all indications. In the FDA analysis the average risk ratio for SSRI versus placebo treated subjects was 1.96 (CI: 1.28-2.98). Considered separately Study 329 did not reach statistical significance for increased suicidality (CI: 0.42-33.21). 2). The methodologically superior reanalysis by Bridge and colleagues also found that in study 329 there was no significant risk difference between paroxetine and placebo. 
Paroxetine treatment in youth does not appear to significantly differ from other SSRIs in the risk of suicidal ideation or attempts and whether SSRIs increase or decrease completed suicide remains an open question. [8-12]
We strongly support efforts to make anonymized raw data from scientific studies available for reanalysis. The validity of “Restoring 329”, however, is doubtful because of author bias and substantial problems with RIATT methodology. To describe Paroxetine 329 as “misreported” is pejorative and wrong based on both state-of-the-art research methods 24 years ago, and retrospectively from the standpoint of current best practices.
Martin B. Keller, M.D. Boris Birmaher, M.D. Gabrielle A. Carlson, MD Gregory N. Clarke, Ph.D. Graham J. Emslie, M.D. Harold Koplewicz, M.D. Stan Kutcher, M.D. Neal Ryan, M.D. William H. Sack, M.D. Michael Strober, Ph.D.
Le Noury J, Nardo JM, Healy D, et al. Restoring Study 329: efficacy and harms of paroxetine and imipramine in treatment of major depression in adolescence. BMJ 2015;351:h4320.
Keller MB, Ryan ND, Strober M, et al. Efficacy of paroxetine in the treatment of adolescent major depression: a randomized, controlled trial. J Am Acad Child Adolesc Psychiatry 2001;40(7):762-72.
Bridge JA, Iyengar S, Salary CB, et al. Clinical response and risk for reported suicidal ideation and suicide attempts in pediatric antidepressant treatment: a meta-analysis of randomized controlled trials. Jama 2007;297(15):1683-96.
Hammad TA, Laughren T, Racoosin J. Suicidality in pediatric patients treated with antidepressant drugs. Arch Gen Psychiatry 2006;63(3):332-9.
Bridge JA, Birmaher B, Iyengar S, et al. Placebo response in randomized controlled trials of antidepressants for pediatric major depressive disorder. Am J Psychiatry 2009;166(1):42-9.
Gibbons RD, Brown CH, Hur K, et al. Early evidence on the effects of regulators’ suicidality warnings on SSRI prescriptions and suicide in children and adolescents. Am J Psychiatry 2007;164(9):1356-63.
Olfson M, Shaffer D, Marcus SC, et al. Relationship between antidepressant medication treatment and suicide in adolescents. Arch Gen Psychiatry 2003;60(10):978-82. 10. Gibbons RD, Hur K, Bhaumik DK, et al. The relationship between antidepressant prescription rates and rate of early adolescent suicide. Am J Psychiatry 2006;163(11):1898-904. 11. Valuck RJ, Libby AM, Sills MR, et al. Antidepressant treatment and risk of suicide attempt by adolescents with major depressive disorder: a propensity-adjusted retrospective cohort study. CNS Drugs 2004;18(15):1119-32. 12. Gibbons RD, Mann JJ. Strategies for quantifying the relationship between medications and suicidal behaviour: what has been learned? Drug Saf 2011;34(5):375-95.
This picture comes from Carl Eliot based on Johanna Ryan’s noting a curious phrase in the conflict of interest statement from Gabrielle Carlsson below.
Competing interests: Please see attachments to this response – the attachments are available on Study329.org.
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.
GlaxoSmithKline Chairman Christopher Gent says he’ll step down at the end of 2015. But thanks to sweeping corruption allegations and a languishing stock price, shareholders want change at the top now, the Sunday Times reports.
“They want the chairman or chief executive gone in 2014,” a well-placed source told the Times. “The most obvious choice is Gent, as he will be going, eventually, anyway.”
According to the Times, top Glaxo ($GSK) investors are plotting a campaign to shake up the company’s board. The institutional shareholders may approach the company’s senior independent director, Deryck Maughan, to get the ball rolling.
Their motivation? Glaxo’s ethics problem. Already embroiled in a huge bribery investigation in China, the country recently has announced a series of corruption probes in other countries. At last count, Glaxo faced allegations in at least 10 countries, including Poland, Syria and Lebanon. Officials in the U.K. and U.S. are pursuing their own investigations of the foreign corruption allegations. And that’s on top of multibillion-dollar payments to the U.S. government for marketing violations and shoddy manufacturing.
The company’s recent financial performance hasn’t helped, either. Glaxo reported disappointing results for the second quarter, as competition for its top-selling respiratory drug, Advair, dragged down sales. Early results from its follow-ups to Advair, Anoro and Breo, were less than spectacular. The upshot: Glaxo warned that its profits forecast might be too ambitious.
GSK senior independent director Deryck Maughan
GSK’s stock price plummeted after its Q2 announcement, to the point where Denmark’s Novo Nordisk ($NVO), a much smaller company sales-wise, topped the British drugmaker’s market cap.
GSK is already scouting for Gent’s replacement, with the chairman himself leading the search. Among the top candidates is Philip Hampton, chairman of Royal Bank of Scotland. Maughan has been working with Gent on his replacement as well. Sky News reports that Hampton’s appointment could be announced next month.
– read the Timesstory (sub. req.)
– get more from Sky News
11.00pm: The court sentences Humphrey to two years and six months in jail on charges of “illegally obtaining private information”, a fine of 25,000 yuan, and deportation from China.
11.05pm: The court sentences Yu to two years and in prison on charges of “illegally obtaining private information”, and a fine of 15,000 yuan.
11.07pm: The couple has five days to appeal this verdict. Court is adjourned.
No mention of GSK throughout the trial.
What is striking though is…
3.34pm: Yu’s lawyer asks Yu whose personal information she had obtained. The presiding judge interjects that such this has been dealt with at a pre-trial hearing. If these names are to be named again, then the current hearing could not be public, the judge says.
Looks like GSK’s lawyers may have been working behind the scenes.
8.45am: A prison van carrying Humphrey and Yu arrived at the court on Hongqiao Road
9.31am: The hearing begins, the court says on its Weibo account.
10.02am: Their son Harvey Humphrey, 19, is in the court room along with consular officials. Last month, Chinese authorities backtracked on plans to hold the trial in secret.
10.11am: The presiding prosecutor says Humphrey and Yu were criminally detained on July 11, 2013, and formally arrested on August 16, 2013.
10.16am: Prosecutor: between April 2009 and July 2013, the two defendants obtained 256 items of information including identity documents, travel records, mobile phone numbers from three Chinese sources, who are facing separate investigations. They paid between 800 and 2,000 yuan per piece of information and resold the information to foreign and domestic clients.
10.43am: Prosecutor questions Humphrey: “Are the facts as laid down in the charges against you accurate?” Humphrey replies: “In general, they look correct, but as for the charges, I don’t understand Chinese law, I am therefore not in a position to comment.”
Prosecutor asks again if Humphrey has objections to the charges. Humphrey says he does not object to the charges.
10.52am: Questioned by the prosecution, Humprey explains how he first registered ChinaWhys as a company in Hong Kong in late 2003 and then in May 2004 established his Shanghai-based firm, Shelian.
10.54am: Humphrey explains that he had chose a different name for his Chinese company because the Industrial and Commercial Administration in Shanghai did not approve ChinaWhys as the company’s name.
10.56am: Humphrey lists the services he provided to clients.
10.57am: He said he provided background investigations on companies and potential hires for clients.
10.58am: He also researched industries to help clients understand the business environment and evaluated clients’ employees, partners, suppliers in situations potentially involving corruption of fraud.
11.00am: Humphrey: “Sometimes clients would raise requests we can’t handle ourselves, and we would look for companies which could accomplish it for clients.”
11.01am: Humphrey: “In general, our services are to help reduce risks, especially in terms of fraud and corruption, for our clients.”
Humphrey testifies in English. Quotes are translated from the court’s Chinese-language transcript.
11.10am: Humphrey says he has worked for several hundred clients between 2004 and 2013.
11.14am: Humphrey lays out how he investigated for clients: internet searches, information provided by clients, interviews, on-site inspections. If that information proved to insufficient, he says he contracted other companies to obtain information, but such information accounts for a very small part of his services to clients.
11.15am: The prosecutor asks Humphrey if he had bought large amounts of citizens’ individual information. Humphrey says he contracted other companies to provide such information, paying them a service fee.
11.20am: The prosecutor asks Humphrey why his testimony differed from what he told police earlier over the price of individual pieces of information. Humphrey says he never told police the exact price of each piece of information he had obtained.
11.23am: The prosecutor asks Humphrey whether he has ever tailed or monitored a citizen. Humphrey says he has never provided such services. He says he has helped clients find Chinese companies that could provide such services.
11.25am: Humphrey says the English word “monitoring” covers a wide range of activities including reading news reports.
11.28am: Prosecutor asks if Humphrey posed as a family member or client to interview target companies. He says he had sometimes used aliases in field investigations or telephone calls.
11.30am: Humphrey says he made sure facts, analysis and conjecture were clearly differentiated in his reports to clients.
11.34am: The prosecutor asks whether Humphrey recalled a project called “Blackthorn”.
11.36am: Humphrey is asked whether he paid to obtain a target’s mobile phone records while conducting the “Blackthorn” project conducted for a Finnish company.
11.42am: Humphrey says he could not remember whether he paid for information in this particular case. He says he acquired information from Zhou Hongbo and Liu Yu about a target who worked in Shandong and travelled frequently to Hong Kong. The client wanted to know what the target was doing in Hong Kong and what assets the target had in the territory. Humphrey says he commissioned another company in this case.
11.49am: Prosecutors ask Humphrey about an “Operation Clown” and “Operation Goose” for two German clients. He replies that he remembers these projects, but struggles to recall details.
11.50am: Prosecutors ask Humphrey whether he and his wife have paid for 256 items of information provided by Liu Yu, Cai Zhicheng, and Zhou Hongbo. He says he doesn’t recall specific numbers but says it is possible they have used these services for as many times.
11.52am: Humphrey says he would call the three individuals, each of whom runs their own company, and pass on targets’ names. In the beginning they would provide reports, but later they became more and more lazy, says Humphrey.
11.54am: Information provided to him included targets’ identity and residency information, information on their family members, overseas travel records and mobile phone records.
11.56am: Humphrey says he and, his wife Yu and a former foreign employee have all contacted these three individuals.
12.00pm: Asked by prosecutors, Humphrey says he paid for such private information. He says he saved much of that information on his hard drives. He says all of his company’s financial matters were handled by his wife.
12.01pm: Humphrey says he was aware that he had obtained private information from citizens after 2009, when a new law on the secrecy of private information was enacted.
12.04pm: Prosecutors ask Humphrey whether he changed his work tactics when Liu Yu was detained. Humphreys says he had learned in March 2013 that Liu had gotten into trouble. He says he gradually changed his company’s operations, but had not completed the changes by the time he was himself detained later in the year.
12.06pm: Prosecutors ask Humphrey whether he thinks that private information could be freely sold on the market. Humphrey says he has never engaged in the business of trading private information.
12.10pm: Prosecutors ask Humphrey how much he charged for his reports. Humphrey says the price depended on the amount work the reports required and that his earlier statement saying reports cost between 40,000 and 50,000 yuan was just an approximation.
12.17pm: Prosecutors ask Humphrey about one report for which he charged 2.64 million yuan and used nine elements of private information. Humphrey says he spent almost a year working on the project.
12.18pm: Prosecutors ask Humphrey if he was detained by Shanghai police in his office. Humphry affirms. The prosecution ends its questioning of Humphrey.
12.21pm: Humphrey’s defence team is now questioning him.
12.22pm: Humphrey says his company’s business model has not changed much since he started the company in 2004. Internal graft and corruption increasingly became a focus of his inquiries, he says. He adds that over the last years he increasingly relied on interviews and public information.
12.26pm: Humphrey says 700 is a correct approximate estimate of the number of reports he produced for clients since 2004. He says he only started a numbered filing system in 2005.
12.28pm: Humphrey says he estimated about half of his reports contained some private information.
12.31pm: Humphrey says companies approached him to investigate their suspicions for fraud and graft. He says 90 per cent of such allegations proved correct.
12.33pm: Humphrey says he needed personal information to verify the identity of targets as, for example, company shareholders and to check whether they had conflicts of interests in their business dealings. He also needed the information to prove that targets were in contact with certain other individuals.
12.37pm: Humphrey says Liu Hong, Cai Zhicheng and Zhou Hongbo run their own companies and that he had now way of auditing their operations.
12.41pm: A defence lawyer asks Humphrey whether he paid for services or private information from Liu Hong, Cai Zhicheng and Zhou Hongbo. Humphrey says he paid for services. They provided him with feedback and additional information, he says.
12.45pm: A defence lawyer asks Humphrey whether he knew where the private information he paid for came from. Humphrey says he did not know how the information was obtained. He says he was aware that law firms could obtain some information.
12.47pm: The court directs a defence lawyer for his wife Yu Yingzeng to ask Humphrey questions. The lawyer asks Humphrey about his typical clients.
12.47pm: Humphrey says most of his clients were large or medium-sized companies. Most were foreign companies, but some were Chinese. They operated in manufacturing and finance or were law firms, he says.
12.48pm: These companies hired him to investigate merges, the hiring of senior executives and corrupt practices of employees, he says.
12.51pm: The court rests until 1.30pm.
1.33pm: The court hearing resumes.
2.07pm: Yu’s defence lawyer asks Humphrey whether clients transferred his commissions to his private or to a company bank account. Humphrey says the commissions were transferred to the company’s bank accounts, either in Hong Kong or Shanghai.
2.14pm: Yu’s lawyer asks Humphrey when he actually tailed a target. Humphrey says he never tailed targets, but, in rare cases, commissioned another company. In one such case, Operation Blackthorn, he proved that a Finnish company’s general manager was defrauding the company and saved it from incurring tens of millions of US dollars in damages, he says.
2.16pm: Judges now direct questions to Humphrey.
2.18pm: A judge asks Huphrey whether he consulted his wife Yu over each decision to obtain private information. Humphrey says they sometimes discussed what kind of information they should try to obtain.
2.20pm: A judge asks Humphrey whether he had signed contracts with the companies that provided him with personal information. Humphrey says he did not sign contracts for individual assignments, but had signed framework contracts relating to secrecy and conflicts of interest.
2.23pm: Humphrey says he did not use every bit of private information in his reports for clients. Some elements of private information helped him as background knowledge when compiling such reports.
2.24pm: Yu Yingzeng is now called to testify.
2.38pm: The presiding judge asks Yu whether she has clearly heard and understood the charges brought against her. She says she has heard and understood every word of them.
2.42pm: Asked whether the charges are accurate, Yu says she would like to clarify two points: Firstly, the price of 800 to 2,000 yuan for piece of information is only an approximation. Secondly, they did not sell public information, but used it to create reports. She says they have never bought information for their own benefit.
2.45pm: The prosecution asks whether Yu had problems when she registered their company in Shanghai, Shelian. Yu says they tasked an agency to handle the paperwork. She says she had no problems in the registration process.
2.48pm: The prosecution asks Yu whether they had compiled about 700 reports. Yu affirms, but says some reports were also compiled abroad.
2.48pm: Asked by prosecutors, Yu admitted to using citizens’ private information.
2.49pm: Prosecutors ask Yu about the origin of this information. Yu says until 2009 they obtained information from Zhou Hongbo, from 2009 until 2011 from Liu Yu and most recently from Cai Zhicheng.
2.50pm: Yu says she never tried to bargain down the cost of information.
2.55pm: Yu says she never knew that the information she obtained was illegal. She says because she did not know the information’s origin, she could not have committed a crime. She says she was not aware that obtaining such information was illegal in mainland China, when it possible to legally obtain the same information in Hong Kong. If she had known she was acting outside the law, she would have destroyed all evidence, she argues.
2.59pm: Yu says 90 – 95 per cent of the information she obtained from Liu Yu, Zhou Hongbo and Cai Zhicheng related to targets’ identity and residency. Phone and overseas travel records have only become recently available, she says.
3.02pm: Yu says only she and her husband knew about Liu, Zhou and Cai’s identities. Prosecutors ask whether she had to go through these agents to obtain information because the information she needed was not publicly available.
3.05pm: Yu says the prosecutor’s assumption is incorrect. She says she knew that Zhou Hongbo was a lawyer and that lawyers could obtain information. She says she did not know how Liu and Cai obtained their information.
3.07pm: “We did not know obtaining these pieces of information was illegal in China”, says Yu.
3.07pm: “Do you think it would touch your privacy if your husband’s or son’s private information was sold and bought?”, asks the prosecutor.
3.09pm: “I have lived abroad for a very long time, my US phone number and address can be found in the yellow pages, it is very easy in the US to find such information,” replies Yu.
3.10pm: Yu says she only rarely assigned another company to tail a target. “95 per cent of our employees’ work was done in the office, investigating online,” she said.
3.14pm: Prosecutors ask Yu whether she has ever impersonated a client, an investor or a relative of a target to obtain information.
3.15pm: Yu says they have pretended to be business contacts.
3.16pm: Asked by prosecutors, Yu says they charged clients between 20,000 and 200,000 for individual reports.
3.17pm: Asked by prosecutor show she paid Liu, Cai and Zhou, Yu says she wants to clarify that she they mostly provided company records. She then says she sometimes transferred their commissions to their private accounts in Hong Kong or the mainland.
3.29pm: The prosecution ends its questioning of Yu.
3.30pm: Yu is now questioned by her own defence lawyer. When asked, Yu says she emigrated to the US in 1981 aged 28. She returned to China in 1999.
3.34pm: Yu’s lawyer asks Yu whose personal information she had obtained. The presiding judge interjects that such this has been dealt with at a pre-trial hearing. If these names are to be named again, then the current hearing could not be public, the judge says.
3.36pm: Yu’s lawyer asks her whether the information she acquired was generic or targeted towards certain people. Yu says she acquired information to prevent and deal with internal corruption in companies and not use this information for individual profit.
“We helped clients solve problems that public security organs could now solve, making them more transparent and open,” she says.
3.42pm: Yu’s lawyer asks her what kind of information she obtained. Yu says 90 – 95 per cent of information was identity and residency information, which, she says, was required to find out whether a client’s employee used a relative to open their own company.
3.44pm: Asked whether every report contained private information, Yu says those containing private information were few and much even less since 2011.
4.07pm: Yu tells the court how they used overseas travel records, including to Hong Kong, to trace fraud.
4.09pm: The presiding judge asks Humphrey’s lawyer whether he wants to ask Yu any questions. Asked, Yu describes the workflow of a typical investigation.
4.12pm: Yu reiterates she obtained information from the client, from online sources or third parties.
4.15pm: Yu accepts the charges in as much as she bought information from a third party, but rejects them saying that she did not sell the information, but only used it to provide analysis to clients.
4.16pm: The defence teams end questioning. The judged ask some additional questions.
4.17pm: Asked by a judge, Yu says she did not sign contracts with Zhou, Liu or Cai, because the amount of money involved was too small.
4.19pm: Asked by a judge whether they would have been able to complete their assignments without private information, Yu says: “More is always better than less.”
4.23pm: The court calls Humphrey back to the stand.
4.27pm: The prosecution submits the testimony of three foreign executives and a former employee at Shelian.
4.31pm: The prosecution submits a second set of evidence: testimony by four former Shelian employees and a technician who provided repair services to Shelian.
4.35pm: After a brief interruption debating the merits of the evidence, the prosecution continues with submitting further elements of the second set evidence: testimony by three more former employees. Humphrey interjects, saying two employees only worked with him only very briefly.
4.52pm: The prosecution submits a third set of evidence to the court: testimony by Humphrey, Yu, testimony by Zhou Hongbo, Liu Yu, Cai Zhicheng.
4.57pm: Liu Yu says she was criminally detained in January 2013 for illegally obtaining private information.
4.59pm: Cai Zhicheng says he charged Humphrey 1,500 yuan for every piece of information he provided: identity and residency papers, overseas travel records.
5.01pm: Zhou Hongbo says Humphrey paid thousands and sometimes more than 10,000 yuan for the investigation of a target, which normally lasted between half a month and a full month.
Transcript will be updated during the day.
5.41pm: The prosecuion says it can prove with its evidence that Humphrey and Yu bargained with third parties over the price of private information they acquired. It also says that private information of all citizens is covered by criminal law, not merely information handled by public organs and companies.
5.44pm: The prosecution submits the fourth set of evidence: Documents, computers and harddrives seized at their residence in Beijing and their office in Shanghai. One harddrive contained 48,849 documents that relate to the charges, one laptop contained 52,234 documents relating to the charges, the prosecution says.
5.47pm: Humphrey says many of the documents could be duplicates.
5.50pm: The prosecution says evidence proves that Humphrey tailed a target in Operation Blackthorn. Humphrey says the task was carried out by a third party.
5.53pm: A defence lawyer for Humphrey reiterates his client’s point. His other lawyer says tailing a target is not necessarily illegal. There are no legal provisions banning the tailing of others to protect one’s own legitimate interests, says the lawyer.
5.55pm: The court rests for a ten minute break.
5.59pm: The court releases its next transcript. A defence lawyer for Yu says monitoring is only once mentioned in the deposition and it referred to an employee standing outside an office building for over three hours.
6.01pm: The prosecution says it documented the use of private information in 27 reports in this set of evidence submitted to the court. It adds that it provided relevant information in the pre-trial hearing.
6.25pm: The court says on its Weibo post that it will hold a press conference on the trial at 7.30pm. The hearing is still ongoing.
6.37pm: Prosecutors say Shelian company had revenue of 20.96 million yuan between 2005 and 2013. The company earned 830,000 yuan for its work on the Operations Goose, Clown and Blackthorn, prosecutors say.
6.43pm: Prosecutors submit Humphrey’s testimony to police in which he reportedly said that he was aware he was operating in a legal grey zone. He was counting on luck and not considering the consequences, he reportedly told police.
6.46pm: Prosecutors submit Yu’s testimony to police in which Yu reportedly said she obtained hukou information, information on a target’s family members, criminal records and telephone records from Zhou Hongbo. She paid 2,000 yuan for personal information and ordered 20-30 items every year, she said.
6.49pm: Yu worked with Liu Yu until Liu was detained in 2013, according to the police record. Liu provided hukou information, information on a target’s family members, criminal record, overseas travel records, mobile phone records and other information. Liu charged about 800 yuan for an item of information.
6.51pm: Cai Zhicheng provided information of about 20 individuals to Humphrey and Yu, according to Yu’s statement to police. Cai charged between 1,000 and 1,500 yuan.
6.53pm: Yu reportedly told police that they transfered Zhou, Cai and Liu’s commission to their US dollar accounts in Hong Kong.
6.54pm: “Our buying of private information was wrong, but it was not a business operation,” she reportedly told police. “We have a grey zone in this industry, at the time we used extraordinary channels to buy these citizens’ personal information.” Yu reportedly said they relied on luck, did not consider the consequences and regretted their actions.
6.59pm: Reacting to the evidence submitted to the court, both Humphrey and Yu say she never told police they relied on luck. Yu said she did not know about the legal environment after the 2009 criminal law reform on privacy.
7.03pm: Humphrey asks the prosecution when police received a first complaint. Prosecuters say the case file started on July 1, 2013.
7.08pm: A defence lawyer submits a third letter attesting to the couple’s good character, two earlier ones’ had already been submitted to the court .
7.09pm: The court concludes the examination of evidence.
7.11pm: The court moves to closing arguments. The prosecution begins.
7.15pm: The prosecution closes by saying that the couple has for nine years bought information on citizens’ identity and residency, family members, vehicle registration, phone records, overseas travel records and had their staff pretend to be employees, investors, clients, or delivery personell to obtain further information. They hired agents to tail and monitor citizens to know more about their living habits and movements.
7.17pm: The prosecution says the couple’s crime was particularly egregious, because they committed it over a period of nine years and because they reaped enormous benefits.
7.19pm: The prosecution closes with a plea for the sanctity of the private space. “Let’s try to consider, if our citizens live in fear in such an environment, how can they feel secure, free or have human rights?”
7.30pm: The court hearing takes a break, to resume later this evening.
More to follow…
8.00pm: In his closing defence, Humphrey said the duo did not sell personal information, but rather, sold the analysis and research of such information to clients. He added that the company’s main service is to investigate internal graft, fraud and help cultivate a good business environment. “They have no other ways of achieving this goal.”
8:10pm: In her closing defence, Yu asked the prosecution for proof that 300 reports out of the 700 used personal information. She also disputed the company’s revenue, saying that the prosecution did not calculate for profit after expenses and costs. She shared an anecdote: “Someone saw a thief steal something, but the police said there’s no evidence therefore they can’t arrest the thief, so the person found the evidence and arrested the thief, then the police came back and said the person broke the law. The public security organ said you violated the thief’s rights.”
8:15pm: The court rests for 30 minutes.
9:00pm: Both defence lawyers argue that Humphrey and Yu’s actions have inflicted limited harm to society and does not constitute a crime.
9:15pm: The prosecution maintains that the duo violated citizens’ rights. “Before a court ruling, those they investigated have not been deemed corrupt, how can you say the parties you are investigating are corrupt?”
10.10pm: In his closing statement, Humphrey talks about his childhood fascination and respect for China. Growing up in a poor family, he saw the China in 1979 and wanted to be a part of its development. He says he has always supported anti-corruption in China, and many of his projects dealt with helping different companies detect internal corruption and fraud. He and his wife wanted to give back to the Chinese community but failed due to their lack of understanding on the 2009 criminal law reform on privacy. Humphrey apologises for disobeying the law and expresses regret. “My wife and I still love and respect China passionately.” He hopes the court will accept their apology.
10.20pm: In her short closing statement, Yu expresses regret over their crimes and begs the court to forgive her husband.
10.30pm: The verdict will be released after the court rests.
11.00pm: The court sentences Humphrey to two years and six months in jail on charges of “illegally obtaining private information”, a fine of 25,000 yuan, and deportation from China.
11.05pm: The court sentences Yu to two years and in prison on charges of “illegally obtaining private information”, and a fine of 15,000 yuan.
11.07pm: The couple has five days to appeal this verdict. Court is adjourned.
(Reuters) – Chinese prosecutors on Friday charged a British investigator and his American wife with illegally obtaining private information in a case that could be key to a bribery investigation against GlaxoSmithKline Plc.
Peter Humphrey and Yu Yingzeng ran risk consultancy ChinaWhys, whose clients included GSK, and their testimony is being closely watched for any comments on the British drugmaker.
The couple’s arrest over a year ago coincided with a government probe into allegations that GSK staff had funnelled hundreds of millions of pounds through travel agencies to bribe local doctors and health officials to boost sales and raise prices.
The prosecutors, laying out the charges at the start of the trial, said the couple had illegally obtained more than 200 items of private information, including household registration data, real estate documents and phone records, and then re-sold the data. GSK was not mentioned in the charge sheet.
According to the court’s official microblog, Yu said she did know that the third-party consultants ChinaWhys had hired to get the data had done so illegally.
“In other countries, we were able to conduct similar checks, including personal information and private transactions, legally through courts,” said Yu. “If we had known that it was illegal, my husband and I would have destroyed all traces of this information.”
While Chinese authorities have not openly connected the arrest of the couple to the GSK probe, Humphrey said in a note last year when he was already in detention that he felt “cheated” by GSK, adding that the drugmaker had not shared the full details of the bribery allegations.
A GSK spokesman has declined to comment on the trial. The drugmaker said in July that the issues relating to its China business were “very difficult and complicated.”
Foreign reporters were given unusual access to the trial after lobbying by the U.S. and British embassies.
The court’s microblog was updated regularly. A television in the media room also momentarily broadcast a grainy image which showed Humphrey, dressed in a polo t-shirt and jacket, sitting down inside the courtroom. He appeared to look weary.
The couple’s son, Harvey, was also in the courtroom with embassy officials.
CORPORATE DATA IN DEMAND
The trial has unnerved China’s risk consultancy community, whose members are much in demand by multinationals and foreign investors for information on potential partners or firms in China, where such data is not easily available.
It also coincides with a growing number of Chinese anti-trust probes that have seen authorities raid offices of Western firms, highlighting the obstacles foreign companies face in navigating China’s murky business world.
Foreign firms must adhere to anti-corruption laws while operating in China amid more stringent enforcement of the U.S. Foreign Corrupt Practices Act and an increase in the number of Chinese firms involved in overseas deals.
Humphrey is expected to plead guilty to the charges, which carry a maximum sentence of 3 years in jail. A verdict in the trial could take up to a month.
He worked for Reuters as a journalist in the 1980s and 1990s, and has previously apologised on state television for breaking any Chinese law.
In testimony read out in court, Humphrey said the due diligence services offered by ChinaWhys largely relied on publicly available records and interviews with executives.
“For projects that required background checks, we engaged a third-party consultancy that provided household registration data. We were only paying for their services; we never purchased or obtained such data directly ourselves,” he said, according to a transcript released by the court’s official microblog.
Humphrey also said he had not sold the private information obtained.
China has in recent years moved to tighten its privacy laws. In 2009, it amended its criminal code to ban the transfer, sale or gathering of Chinese citizens’ information by government firms and companies involved in telecoms, transportation, education and medical treatment.
(Additional Reporting by Engen Tham and Fayen Wong; Editing by Miral Fahmy)
Federal Bureau of Investigation agents have been interviewing current and formerGlaxoSmithKlineGSK.LN -3.16% PLC employees in connection with bribery allegations made against the drug maker in China, according to a person familiar with the matter, as fresh claims of corruption surfaced against Glaxo’s operations in Syria.
The interviews have taken place in Washington, D.C., in the past few months and are part of a Justice Department investigation into Glaxo’s activities in China, the person added.
The U.S. Securities and Exchange Commission also is investigating the company’s business in China, according to people familiar with the matter. Spokeswomen for the SEC and FBI separately declined to comment.
Chinese authorities have accused Glaxo’s former top executive in that country, U.K. national Mark Reilly, of “large-scale” bribery. Mr. Reilly couldn’t be reached for comment and hasn’t commented in the past.
Glaxo said it is cooperating with the Chinese authorities, and has informed the Justice Department and the SEC of the Chinese investigation. A spokesman for the company declined to comment on the FBI interviews and said Glaxo’s discussions with regulators were confidential.
Last week, Glaxo received an anonymous email claiming its employees in Syria bribed doctors and pharmacists over the past five years to promote products including painkiller Panadol and toothpaste Sensodyne.
The bribes took the form of cash payments, speaking fees, trips, free dinners and free samples, said the email, which was reviewed by The Wall Street Journal. The email cited names and dates.
Doctors promoting Glaxo’s cold and flu products were paid $2,500 in cash in December 2010, the email says, while $2,500 was paid to a national dental association in return for getting Glaxo’s Sensodyne logo on dentists’ prescription notepads.
Syrian health officials allegedly received bribes from Glaxo employees to fast-track registration of its Sensodyne dental products, including cash payments and a trip to a 2011 conference in Rome, the email maintains.
Glaxo employees also were involved in smuggling a narcotic product from Syria into Iran, the email alleges.
The product in question, pseudoephedrine, is a raw ingredient of Glaxo’s congestion medicine Actifed and can also be used in the production of methamphetamine. The Syria allegations was reported by Reuters on Thursday.
Glaxo’s consumer-health operations in Syria—where the bribery allegations are being made—were closed in 2012 as the country’s civil war worsened. Glaxo retains its prescription-medicine operations in Syria.
Glaxo said it would thoroughly investigate all claims made in the Syria email, and said it has asked the sender for more information. The company said it has zero tolerance for unethical behavior, adding, “We welcome people speaking up if they have concerns about alleged misconduct.”
The SEC has recently started giving whistleblowers a cut of any settlement reached as the result of allegations detailing securities-law violations—providing a financial incentive for anyone with concerns to step forward.
Under the U.S. Foreign Corrupt Practices Act, which falls under the SEC whistleblower program, it is illegal for companies with significant U.S. operations to bribe foreign officials in exchange for business. In 2010 Glaxo disclosed it had been contacted by the Justice Department and the SEC about its overseas operations as part of a wider FCPA investigation into pharmaceutical-industry business practices abroad, including in China. The agencies also began investigating the more recent allegations in China last year, according to people familiar with the matter.
The tens of thousands of dollars in bribes allegedly paid in Syria are on a much smaller scale than the allegations in China, where officials last July alleged Glaxo had funneled bribes totaling $480 million through travel agencies.
Glaxo said it takes all bribery allegations in any country seriously. Last year, it announced an overhaul of its marketing practices, including stopping all payments to doctors to attend conferences or speak about its drugs. Earlier this week, Glaxo cut its full-year earnings outlook after second-quarter profits were hit by weak U.S. sales of its respiratory drugs, currency headwinds and falling sales in China.
Glaxo’s shares are down almost 12% for the year to date.