A British private investigator jailed in China after GlaxoSmithKline’s bribery scandal has been blacklisted by banks, including HSBC and Royal Bank of Scotland, after authorities helped bring him back to the UK.
Two former corporate investigators have sued GlaxoSmithKline, alleging the drugmaker misled them and induced them to investigate an innocent person, resulting in their imprisonment.
The complaint, filed with the U.S. District Court in Philadelphia and made public on Wednesday, was brought by Peter Humphrey, who is British, and his American wife, Yu Yingzeng.
The couple were detained in 2013 and found guilty by a Chinese court in 2014 after being asked by GSK to investigate a whistleblower within the pharmaceuticals group.
They were convicted of illegally obtaining private records of Chinese citizens.
The couple allege GSK misled them by stating that the whistleblower’s allegations of widespread corruption within the company were false. GSK was fined a record 3 billion yuan ($436 million) in 2014 for paying bribes to doctors to use its drugs.
A GSK spokesman said: “We do not believe this case has any merit and will vigorously defend against the allegations.”
A British private investigator jailed in China after GlaxoSmithKline’s bribery scandal has been blacklisted by banks, including HSBC and Royal Bank of Scotland, after authorities helped bring him back to the UK.
Peter Humphrey, who was convicted after a closed-door trial in 2014 of illegally obtaining information on Chinese citizens, told the Financial Times that HSBC had withdrawn his personal and business accounts without explanation on his repatriation last year after a decades-long relationship. RBS’s offshore arm, with whom he had banked since 2012, also pulled services.
While the banks declined to comment to the FT on specific cases, Mr Humphrey believes that the reason they closed his accounts was because of a confidential database used by 49 of the world’s 50 biggest banks, including HSBC and RBS.
World-Check, owned by Thomson Reuters, is used by banks, law firms and government agencies to research individuals and go through sanctions lists. Banks use it as part of their “know your client” checks, or KYC for short, that they must carry out as part of anti-money-laundering rules.
But detractors allege that the database serves as an unaccountable blacklist, aggregating unverified blogs and newspaper articles, including some from state-sponsored sources, as well as court judgments from around the world.
The database’s own fine print states that it provides merely a snapshot that “should be read by users in the context of the fuller details available in the external sources provided” and cautions their customers to verify the information. Individuals can request changes to inaccurate information.
World-Check said in a statement that it aggregated information from government watch lists and sanctions databases, as well as “publicly available information from reputable sources in order to help clients comply with anti-money laundering and counter-terrorist financing regulations. Customers can then use this data to follow their own regulatory compliance policies and procedures.”
HSBC said in a statement: “HSBC has a moral and regulatory obligation to have systems and controls in place to manage financial crime risk. As part of managing this risk, we periodically review our customer relationships and in doing so we gather information from a wide range of sources and take a number of factors into consideration.”
RBS declined to comment.
An insider at one high-street bank said that while cross-checking might occur for potentially lucrative new customers, a red flag for anyone else would be enough to terminate any relationship.
World-Check’s results for Mr Humphrey, seen by the FT, group him with GSK and its former employees charged with bribery, even though he was not part of that investigation. The records go on to state that he was arrested then subsequently jailed “for alleged illegal trafficking of personal information”.
“That is erroneous and injurious; there was no ‘trafficking’ or buying and selling of information. We produced in-depth reports,” said Mr Humphrey. “The database also equates the validity of convictions in a country like China with those of countries with a long rule of law.”
Mr Humphrey and his wife were detained by Chinese authorities in 2013 after helping GSK, which was not mentioned during their trial, identify the source of a secretly filmed sex tape of its then top executive in China in bed with his girlfriend.
GSK was fined £300m in 2014 by a Chinese court for funnelling billions of renminbi to hospitals, doctors and officials in an attempt to boost sales in one of the world’s biggest and fastest-growing drug markets. The company remains under investigation by the UK’s Serious Fraud Office.
Mr Humphrey is not the only person to take issue with the database. Maajid Nawaz, a former Liberal Democrat candidate and co-founder of an anti-extremist think-tank, was incorrectly labelled by World-Check as having terrorist links. He has now instructed Mark Lewis at Seddons, the solicitor used by celebrities and other victims of the phone-hacking scandal, to pursue a claim against the company.
Iqbal Asaria, an academic and former Bank of England adviser on Islamic finance who was made a CBE in 2005, was also erroneously labelled as having links to terrorism on the database after it picked up unsubstantiated allegations on a blog.
Thomson Reuters declined to comment on any specific case, citing data privacy laws. The FT competes with the company in providing news.
Banks have taken a conservative approach to KYC since US authorities in particular started cracking down on money-laundering. HSBC is especially sensitive since it was landed with a $1.9bn fine in 2012 from the US Department of Justice. It has taken a cautious approach and has closed entire business lines if they are deemed too risky.
But regulators are concerned that banks have taken “de-risking” too far, shutting out charities, innocent individuals, or indeed whole countries, deemed by banks to be too dicey.
According to a report published this year for the Financial Conduct Authority, banks have severed ties with clients they deem risky at an accelerated rate over the past three years in response to stretched compliance teams and a reduced appetite for risk in the wake of fines.
“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”
“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)”
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.
In the statement, which first appeared on Monday, Li reportedly denied she had business dealings with GSK after leaving the company six years ago.
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.
On Monday, Humphrey was shown apologising on state-run China Central Television, saying he and his wife “deeply regret” breaking any laws. He added he would not have worked with the drug manufacturer had the company informed him about the full details of the e-mails it received from whistle-blowers.
Sir Andrew Witty, the chief executive of GSK, is a man who has said he wants to put ethics at the heart of the pharmaceutical firm’s business.
He has made much of the company’s work in Africa and bringing down that continent’s drugs bill. GSK’s research capability is widely regarded as some of the best in the world.
So, the pain of the allegations coming out of China must be particularly acute.
The contents of the emails sent by the person (or people), known as “gskwhistleblower”, to GSK alleging corruption among Chinese sales teams makes for sobering reading. What is striking is the amount of detail, with email addresses, precise drug names and internal projects all written about by someone who clearly knows the business well.
Whether what they say is right, of course, is another matter.
Two emails sent in January and May last year talk of “aggressive sales tactics”, “bribery” and wrongful payments made to thousands of doctors. The emails offer to provide more information.
Following a series of questions sent by the BBC to GSK yesterday, the company responded with its fullest account yet of what it believes has – and hasn’t – happened.
“The issues relating to our China business are very difficult and complicated,” it said.
“GSK takes all whistle-blowing allegations very seriously and actively encourages whistle-blowers to come forward if they have concerns.
“Investigations into the allegations made in January 2013 about GSK’s business in China were conducted over several months with the support of external legal and audit advice.
GSK has some serious questions to answer about how it treated Mr Humphrey, who is facing trial next month, possibly in secret.”
“Some fraudulent behaviour relating to expense claims was identified, and this resulted in employee dismissals and further changes to our monitoring procedures in China. However, this investigation did not find evidence to substantiate the specific allegations made in the emails.”
The key for Sir Andrew’s reputation is how he handled the allegations once they came to his attention.
GSK says it used both in-country and international investigators – freeing them from the allegation that the Chinese arm of the business (accused of systematic corruption) was simply investigating itself.
I understand that a report was completed by May or June 2013 that did find irregularities, but nowhere near the scale alleged in the email.
The fact that Peter Humphrey, the investigator hired by GSK to look at the separate issue of a covert video recording of a senior GSK China executive, Mark Reilly, having sex, found that the allegations were “credible” does not help Sir Andrew.
Mr Humphrey, who is now in detention in China, appears to have had limited access to GSK material beyond that pertinent to the tape – the existence of which was first revealed by The Sunday Times last weekend.
Which raises the question – if he was investigating the sex tape which was part of the overall allegations against GSK in China, why wasn’t he given the other incendiary emails earlier in the process?
Mr Humphrey sent a message from prison – seen by the BBC – which says that he feels “cheated”. GSK has some serious questions to answer about how it treated Mr Humphrey, who is facing trial next month, possibly in secret.
It wasn’t until the Chinese authorities announced their own investigation into allegations of corruption within GSK in July that the business made any public comment.
Asked about this lengthy delay, GSK said: “We inform the financial markets in relation to all material matters following internal and external legal advice. We are confident we have satisfied all our disclosure requirements.”
So far, GSK’s share price has hardly flickered since the allegations became public. Investors will be waiting to see the level of any fines the Chinese authorities might impose before voting with their wallets.
And whether anything uncovered reveals wider spread issues about GSK operates. Don’t forget, in 2012 GSK was fined $3bn in America for fraudulently promoting drugs for unapproved use and failing to report safety data to the Food and Drug Administration.
The company insists it has radically changed its processes since then – both in America and China.
And it appears that at present the board is satisfied with how GSK’s executives are handling the investigation.
China is a small part of GSK’s global operations, accounting for about 3% of its revenues.
It is well behind the other big foreign players in the rapidly growing pharmaceutical sector. Astra Zeneca and Pfizer, subject of a takeover battle earlier this year, are the leading foreign drug providers in the country.
But GSK does want to keep hold of its licence. The Chinese three tier market (research and development, manufacturing and consumer) is an increasingly valuable one.
Sir Andrew does not want to pull out. He must hope that the Chinese authorities’ findings come quickly and do not reveal anything which the company failed to uncover.
The GSK Chinese Bribery Scandal moved into a new phase yesterday with prime minister David Cameron bizarrely weighing into the discourse with his glowing character appraisal of the good character of GSK. GSK are currently embroiled in a massive bribery scandal in China- one of the biggest corruption scandals to happen in China for years.
His son recently made a plea of help to GSK’s CEO Andrew Witty (who is currently on a UK trade mission to China with David Cameron) but according to GSK :
“Peter Humphrey is not a GSK employee and we understand his arrest and investigation is being treated as a separate matter by the Chinese authorities. Therefore we can’t comment further.”
I have to say, it looks like GSK’s China-gate is going to be even more intriguing than their last foray into Constant Gardener territory with their US corruption adventure which cost them to the tune of 3 Billion.
Will be interesting to see how this new GSK saga unfolds…
Son of jailed China investigator appeals to Cameron for help
The son of Peter Humphrey, a British investigator who has spent nearly five months behind bars in Shanghai, has called on the Prime Minister to “do everything he can” to help his father during a three-day visit to China this weekPhoto: China Central TV
The son of a British investigator who has been in Chinese police custody for nearly five months has called on David Cameron to raise his father’s case with China’s top leaders during his three-day tour that starts on Monday.
Peter Humphrey, 57, and Yu Yingzeng, his 60-year-old American wife, were detained by Shanghai police on July 10.
In late August the couple was formally accused of involvement in “operating illegal research companies and trafficking personal information”. They were paraded on Chinese state television wearing orange prison uniforms and Mr Humphrey made what was purportedly a confession.
“We sometimes in the past used illegal means to acquire personal information,” he said, in Chinese. “I’m very remorseful about this and wish to apologise to the Chinese government.”
It is thought that Mr Humphrey, a former journalist who first came to China in the late 1970s, and his Chinese-born wife are currently being held at a detention centre in eastern Shanghai.
Speaking on the eve of Mr Cameron’s trade mission to China, their son, Harvey said: “I hope the prime minister will do everything he can to resolve my parents’ case.”
“I haven’t seen them for five months. The Foreign Office have kept me in touch and I hear they are well treated. But it is very worrying,” the 18-year-old British student told The Sunday Times.
The Prime Minister is scheduled to arrive in Beijing early on Monday morning and is expected to hold separate meetings with Xi Jinping, China’s president, and Li Keqiang, its premier. He is also expected to visit Shanghai where he is likely to meet senior local politicians.
Until disappearing in July, Mr Humphrey ran ChinaWhys, a risk management consultancy that specialised in helping foreign firms safety navigate China’s notoriously complicated and corrupt business environment.
ChinaWhy’s website, which remains active despite Mr Humphrey’s incarceration, says it “offers discreet risk mitigation solutions, consulting and commercial investigation services to corporate clients in important and sensitive matters across the Greater China region and beyond.”
Among its successes, the business lists “neutralizing a counterfeit-and-fraud syndicate that hijacked the business of a global consumer goods manufacturer, eliminating fraud from the buying operation of a leading megastore chain… and orchestrating the recovery of a kidnapped child in China.”
Mr Humphrey’s clients also included GlaxoSmithKline (GSK), the British pharmaceuticals giant that found its China’s operations at the centre of a major corruption probe in July.
GSK’s CEO Sir Andrew Witty, is expected to travel to China with Mr Cameron on Sunday as part of a 120-member trade delegation but it is not clear if either man plans to raise Mr Humphrey’s case with Chinese authorities.
Calls to the British embassy in Beijing went unanswered on Sunday.
The embassy has previously expressed concern that Mr Humphrey had been “publicly interviewed about the details of his case, which is currently under investigation and has yet to come to trial.”
However, observers question Mr Cameron’s willingness to jeapordise economic ties with China by raising thorny issues such as human rights or Mr Humphrey’s controversial arrest.
British investigator Peter Humphrey ‘regrets’ illegal data scam on China TV
Couple make public confession over alleged £320m bribery scandal a drugs giant
Chinese state television has broadcast a confession by British corporate investigator Peter Humphrey who, along with his American wife, has been held in connection with an alleged £320million bribery scandal at drugs giant GlaxoSmithKline.
“The way we acquired information was sometimes illegal. I feel very regretful about it and want to apologise to the Chinese government,” Mr Humphrey said in the CCTV report.
Such public apologies are common by Chinese officials and celebrities accused of wrongdoing, but a confession by a foreigner rarely happens.
Mr Humphrey sat with his wife Yu Yingzeng – both in orange prison vests and handcuffs – during the report.
The couple were arrested on 16 August in Shanghai and charged with operating illegal research companies and trafficking personal information about Chinese citizens, police said.
Mr Humphrey, 57, and Ms Yingzeng are founders of ChinaWhys, a Shanhai-based risk management firm, which provides investigation services to companies. GlaxoSmithKline – the biggest UK-listed pharmaceutical firm – was one of their clients.
GSK is accused of working with Chinese travel agencies to host conferences for up to 2,000 people, with events costing about 10million yuan (about £1m).
Chinese authorities claim GSK executives inflated the cost of these events to use excess cash to pay bribes to doctors and middlemen.
The company has admitted some of its China executives may have violated both Chinese law and the company’s policy. A GSK spokesman confirmed they were co-operating with the authorities.
CCTV’s television broadcast also showed Mr Humphrey’s and Ms Yingzeng’s offices being raided, as well as interviews with police officers.
“[The] Investigation found that the couple illegally trafficked a huge amount of personal information on Chinese citizens to seek profits via registering so-called research companies in Hong Kong and Shanghai since 2003,” the Xinhua news agency reported.
Mr Humphrey was formerly a Reuters correspondent in Hong Kong. After leaving the news agency 14 years ago he worked as an investigator in different parts of Asia, tracking white collar crime and corporate fraud.
Ms Yingzeng is a California-educated accountant who has served as a financial controller in the United States and Hong Kong, and as a high-level advisory consultant in China.
ChinaWhys’ website claims Ms Yingzeng: “Is experienced in operational/financial audit to identify management control weakness, bribery concerns and fraud risks.”
It says she has worked on “complex fraud investigations at multinational operations in China, [with] successes including solving a supply chain fraud by establishing activity links to capture criminal evidence for a US food manufacturer”.
The British Embassy in Beijing confirmed last week that Mr Humphrey had been arrested and they were providing consular assistance, but gave no details of charges.
- theguardian.com, Wednesday 21 August 2013 11.58 BSTA Chinese employee walks into a GlaxoSmithKline office in Beijing. Peter Humphrey and Yu Yingzeng were detained as police investigated bribery allegations involving the company. Photograph: Jason Lee/Reuters
A British risk consultant held in China since mid-July amid an investigation into the country’s pharmaceutical industry has been arrested, the British embassy in Beijing and his family said on Wednesday.
Peter Humphrey and his wife, Yu Yingzeng, were detained in Shanghai on 10 July as police investigated bribery allegations against GlaxoSmithKline.
In China, an arrest typically means police believe they have enough evidence for a case to be brought to trial. Detentions can last for weeks and end in release without charges being filed.
It was not immediately clear if Humphrey’s arrest was directly related to the investigation of GSK, which has been accused by China of funnelling up to 3bn yuan (£312m) to travel agencies to facilitate bribes to doctors and officials.
China has taken a tough stance on corruption and high prices in the pharmaceutical industry as it widens access to healthcare, bringing an estimated $1tn healthcare bill by 2020.
“We can confirm the arrest of a British national, Peter Humphrey, in Shanghai on Monday19 August. We are currently providing consular assistance,” a British embassy spokeswoman, Hannah Oussedik, told Reuters by phone.
Oussedik declined to offer additional information about the reasons for Humphrey’s arrest. The US embassy in Beijing could not be reached immediately to confirm whether Yu had also been arrested. The US consulate in Shanghai declined to comment.
Shanghai police did not respond to a request for comment.
A statement issued by a member of Humphrey’s family said both Humphrey and Yu had been arrested.
A source close to the family said they had not yet been told which charges would be laid against Humphrey, or when, but the statement said lawyers had told the family that the couple were detained last month because they had broken a law related to buying private information.
Humphrey and Yu co-founded ChinaWhys, a business risk advisory firm that has done work with drug companies, including GSK, separate sources familiar with the matter have said.
Humphrey worked as a journalist for Reuters in the 1980s and 90s. The ChinaWhys website says he has been a risk management specialist and corporate detective for 14 years.
In March 2010, four executives from mining giant Rio Tinto were jailed for taking bribes and stealing commercial secrets. Three of those executives were Chinese while the fourth was a Chinese-born Australian.