I think that the UK Serious Fraud Office will either let GSK off the hook completely (due to some technicality of law or loop-hole) or GSK will get off very lightly (a slap on the wrist). Either way, I would be extremely surprised if justice is adequately served.
In a just world, one where corporations like GSK don’t get to operate above the law- the top executives at GSK would all be in jail. However we don’t live in a just world, we love in a corporate driven world, one where corporations get to decide on what laws they can break at a whim, with little consequence from the establishment or the authorities.
It will be interesting to see whether the serious fraud office in the UK has the balls, or even the power, to bring the GSK Goliath to book…
Judging from past examples, of GSK criminality, I won’t hold my breath…
They are the UK’s prized Pharma Cash-cow…
Too many people, in places of power, are generating too much wealth from this cash cow for it- to ever be -put out to pasture…
LONDON (Reuters) – The UK Serious Fraud Office (SFO) said on Thursday it expects to decide next year whether it will file criminal charges in bribery investigations related to drugs giant GlaxoSmithKline (GSK.L) and aero engine company Rolls-Royce (RR.L).
The SFO launched an investigation into GSK and its subsidiaries in 2014. Britain’s biggest drugmaker has already been fined a record 3 billion yuan ($452 million) by Chinese authorities for paying bribes to doctors to use its drugs.
The SFO’s continued investigation into Rolls-Royce is focusing on individuals after the aero engine maker paid 671 million pounds ($870 million) in January to settle British, U.S. and Brazilian bribery investigations.
David Green, the head of the SFO, told Reuters in an interview that he hoped a decision about charges would be made before he steps down after six years in the job next April.
“I would expect resolution in both these cases in 2018, and hopefully prior to my departure in April,” he said.
Separately, a spokeswoman for the Attorney General’s Office, which is responsible for SFO director appointments, said the recruitment process for Green’s successor had yet to begin. But she said there was “still plenty of time” and that there “will be an appointment in due course”.
Prime Minister Theresa May’s Conservative Party pledged in May to abolish the specialist investigator and prosecutor and roll it into the four-year-old National Crime Agency (NCA) to “strengthen Britain’s response to white collar crime”.
But the proposal drew sharp criticism from white collar crime lawyers, lawmakers and anti-corruption groups and was later dropped from the minority government’s official two-year policy program.
Lawyers said the omission could signal a reprieve for the agency, which in June charged Barclays (BARC.L), one of the country’s biggest banks, and four former senior executives with fraud over undisclosed payments to Qatari investors in 2008.
Back in September, our old compliance friend GlaxoSmithKline plc (GSK) settled with the Securities and Exchange Commission for violating various provisions of the Foreign Corrupt Practices Act, namely for improper payments, gifts, and other bribes made by GSK subsidiaries in China to Chinese officials to boost sales in that country. Back in 2013, GSK got itself into trouble for a wide-ranging bribery scheme in China, which included the involvement of top-level country managers down to individual sales personnel. The bribery schemes were numerous, including direct bribe payments to all healthcare personnel (HCPs) who could be influenced to prescribe the company’s pharmaceutical products, indirect payments to hospital administrators who could then dole out the money, excessive and over the top gifts, travel and entertainment, and very large payments for speaking events. According to the SEC, the corruption within GSK’s China unit was pervasive, with bribes actually written into the sales plan for the company.
For this, the SEC fined GSK $20 million and declined to prosecute, citing GSK’s cooperation with the Commission during its investigation and global remedial actions taken by GSK to eliminate payments to doctors, improve risk assessment, and improve third-party oversight. This declination might have made more sense with a different company. But this is GlaxoSmithKline here, and this was hardly the company’s first brush with the law, nor its most severe.
Corporate integrity agreement. In July 2012, GSK pled guilty and paid $3 billion to resolve fraud allegations and failure to report safety data and for false price-reporting practices in what the Justice Department at the time called the largest healthcare fraud settlement in U.S. history and the largest payment ever by a drug company for legal violations.
You would think that any company that has paid $3 billion in fines and penalties for fraudulent actions would take all steps possible not to engage in bribery and corruption. Indeed, as part of that settlement, GSK agreed to a Corporate Integrity Agreement (CIA) that applied not only to the specific pharmaceutical regulations that GSK violated but all of GSK’s compliance obligations, including the Foreign Corrupt Practices Act (FCPA).
In addition to requiring a full and complete compliance program, the CIA specified that the company would have a compliance committee, inclusive of the compliance officer and other members of senior management, whose job was to oversee full implementation of the CIA and all compliance functions at the company. These additional functions required deputy compliance officers for each commercial business unit, integrity champions within each business unit, management accountability, and certifications from each business unit. Training of GSK employees was also specified. Further, there was detail down to specifically state that all compliance obligations applied to “contractors, sub-contractors, agents, and other persons (including, but not limited to, third-party vendors).” So, while GSK may have separate FCPA liabilities to be investigated by the Justice Department; it may be more of an issue that the company could be in violation of its CIA.
“Transparency is what enables the public to understand why particular results are reached in particular cases and helps to reduce any incorrect perception that our enforcement decisions may be unreasoned or inconsistent.”
Leslie Caldwell, Assistant Attorney General
Chinese criminal conviction. But that is not all. In September 2014, barely two years after its historic DoJ settlement, GSK was convicted in a secret trial in a court in the Hunan province of China for bribery and corruption related to its Chinese business unit. The amount of the fine was approximately $490 million, roughly equal to the 3 billion Rmb that Chinese investigators alleged that GSK had paid in bribes. Five GSK senior executives from this China business unit were also convicted. Mark Reilly, the former head of GSK in China, was sentenced to prison for three years with a four-year suspension. He was deported and reportedly has left the company. Zhang Guowei, GSK China’s former human resources director, was sentenced to three years in prison with a three-year suspension. Liang Hong, GSK’s former China unit vice president and operations manager, was sentenced to two years in prison with a three-year suspension. Zhao Hongyan, GSK China’s former legal-affairs director, was sentenced to two years in prison with a two-year suspension. Finally, Huang Huang, the GSK China business-development manager, was sentenced to three years in prison with a four-year suspension.
There is even more. The New York Times recently ran a front-page story about GSK and China, focusing not so much on the bribery schemes or individuals, but on GSK’s inept response to whistleblowers’ allegations of bribery and corruption in the company’s Chinese business unit. “The Glaxo case was fueled by missed clues, poor communication, and a willful avoidance of the facts,” the Times wrote. “For more than a year the drug maker brushed aside repeated warnings from a whistleblower about systemic fraud and corruption in its China operations.”
It turned out that the company had received substantive information concerning the bribery schemes by way of e-mail, written in excellent English about the company’s operations in China. Yet the GSK response was to try “another common gambit in China: bribing officials” who were doing the investigating. The company “set up a special ‘crisis management’ team in China and began offering money and gifts to regulators.”
In the midst of this corruption investigation crisis, the company received a video of its country manager, Mark Reilly, having sex with a Chinese woman. An e-mail alleged that a Chinese company, seeking to corruptly gain business favors with Reilly and seek additional business with GSK China, provided the woman. GSK officials in London thought this sex tape video was the work of the same person who was the whistleblower for the corruption allegations against the company and set out to discover the identity of the corruption whistleblower, as well as the sex tape whistleblower. Rather amazingly, GSK’s internal investigation turned up no evidence of bribery in its Chinese business unit, in spite of the detailed information provided by the whistleblower for the corruption allegations. At some point the whistleblower for the corruption allegations provided the same information to Chinese authorities, and this led to arrests of GSK China personnel in late June and July 2013.
The DoJ’s declination order did not reference the Chinese trial, penalty, or investigation and seemed to sidestep GSK’s still-existing CIA for their prior violations and all of the facts developed in the Chinese governmental investigation of GSK. Assistant Attorney General Leslie Caldwell has consistently communicated that the Justice Department is committed to the international fight against corruption, often leading the way. The Department has been training prosecutors from other nations in the techniques of investigating corruption and enforcement of anti-bribery laws.
Moreover, with this increase in the international fight against bribery and corruption, it would seem appropriate that a company not be double penalized by paying a penalty for the same offenses in multiple countries. However, if the Justice Department were providing such credit to GSK, it would seem appropriate that such information be communicated to heighten the transparency around the entire process. From the outside, it does not appear that GSK met at least two of the four prongs required under the FCPA Pilot Program. GSK did not self-disclose the violations of its Chinese business unit and did not cooperate with the authorities. While there were certainly some remedial steps taken by the company in China, they have not been detailed in any manner.
Whatever the reason for the declination, it would have been much better if the Justice Department had been more transparent in their decision-making calculus. Indeed, in recent remarks at the George Washington University School of Law, Caldwell spoke about the importance of transparency in the process. She said, “Transparency is what enables the public to understand why particular results are reached in particular cases and helps to reduce any incorrect perception that our enforcement decisions may be unreasoned or inconsistent. Transparency also informs corporate actors and their advisers what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation.”
Just how GSK was able to get a complete pass from the Justice Department may well remain a mystery, and such mysteries do no one any good.
A truly fascinating read regarding the corruption in China, all committed by the hand of British based pharmaceutical giant, GlaxoSmithKline.
The New York Times (NYT) recently ran a superb article regarding GSK’s nefarious activities in China, activities that saw them plead guilty, a result of which saw them being handed down a $500 million dollar fine.
The article by David Barboza, although brilliant, is tantalizing, in as much that The Times claims to have in its possession emails and documents, none of which they have provided, at least in their entirety.
The China scandal is a story of greed, corruption, cover-ups, bribery and pay-offs, all combined with a sex scandal video and a company burying it’s head in the sand over its China practices – preferring instead to go after the person who blew the whistle on the whole sordid affair.
It’s a subject I covered many times on this blog (Links at the foot of this post) and one that seems to be rehashed with additions on a regular basis.
The Times article throws out some very interesting facts about the case that were previously kept under wraps – one such fact being that they (The Times) have evidence that “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.””
Glaxo buying a patient’s silence? Surely not?
There was me thinking they only did that in litigation, Paxil withdrawal (Over 3,000 patients ‘paid off’) – Paxil Birth defects (Over 800 patients ‘paid off’)
So, who was the patient in receipt of Glaxo’s $9,000, moreover, what did this patient have that GSK didn’t want others to see?
According to the NYT…
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.
In 2012 Glaxo plead guilty to a whole host of violations throughout America, the guilty plea resulted in a record breaking fine of $3 billion. At the time, Glaxo Chief, Andrew Witty, pledged, “We’re determined this is never going to happen again.”
Witty, who had been made aware of the unfolding stench in China shortly after the 2012 guilty plea in the US, is stepping down from his CEO position in April next year – It’s quite a legacy he has left behind, one which he took over from former Chief, JP Garnier who, in essence, oversaw the corruption in America and left Witty to suck up the fallout.
What an abhorrent company this is. Corruption, bribery (of officials and patients) and the manufacturer of prescription meds that have either killed people or disfigured them in such a way that they need to continue having surgery for the rest of their lives. Let’s not forget those that have suffered as a result of becoming addicted to GSK’s medications either.
The Times article also digs deeper into the involvement of Mark Reilly, who, at the time, was Head of GSK’s China operations. They claim…
An 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.”
That’s some perk to have! China Comfort Travel bring a whole new meaning to the word ‘comfort’.
Any jobs going whereby the employer offers a bonus of playing hide the salami?
I’m sure red-blooded males would have been first in-line for such a job working for a company complicit in fraudulent activities. Sadly, for those red-blooded males at least, Reilly was offered (and took) the perk – I wonder if he claimed for the 15 minutes of overtime too? (Assuming that Reilly could last that long in the sack)
When faced with over 17 months of emails from the whistleblower Glaxo decided to seek help, they did so by hiring a private investigator, Peter Humphrey and his wife, Yu Yingzeng.
Humphrey did some digging and, at the time, provided information to Glaxo that pointed to the possible whistleblower. Vivian Shi, was a 47-year-old executive handling government affairs in Glaxo’s Shanghai office, I say former because she was previously fired by GSK for their belief (Before Humphrey was hired) that she was behind the whistleblowing allegations. The ‘official’ line of her dismissal was that she had been falsifying travel expenses.
Humphrey, it appears, was merely suggesting that Shi may have been involved – he, at no time, ever provided GSK with any evidence that their former executive was the one who was whistleblowing. Shi, who remember had already left GSK, denied any part in the whole Chinagate scandal.
During his investigations Humphrey obtained information that was deemed to be by false means according to Chinese officials. Both he and his wife were later arrested, charged then sent to prison. Meantime, Reilly, who was the mastermind of the whole scam, was sent back home to the UK – No jail time. It’s unknown what Reilly is doing today, presumably he doesn’t work for GSK in any capacity, although I wouldn’t put it past them to re-hire him, just as they did with Vivian Shi, the very person they had fired because they thought she was the one blowing the whistle on its Chinese operations.
GSK must be a truly great company to work for, not only do they offer, by proxy, free blowjobs to heads of operations but they re-hire you after previously sacking you for, ahem, “falsifying travel expenses.”
The Timesarticle is a must read and once again highlights how GSK prefer to target people who bring the company’s misdemeanors to their attention rather than target the person carrying out the misdemeanors.
GSK Corporate motto claims, “We are dedicated to improving the quality of human life by enabling people to do more, feel better, live longer.” – I just never knew this included blowjobs via complicit bribery deals – the re-hiring after breaking rules – and buying patients silence.
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.
World Cup ticket giveaways are under investigation
German prosecutors are investigating the offer of perks, such as free World Cup and Formula One trips, to thousands of German doctors by British pharmaceuticals company GlaxoSmithKline (GSK).
Europe’s biggest drugs firm said it was cooperating fully with the investigation and added the accusations stemmed from the period between 1997 and 1999, before Glaxo Wellcome merged with SmithKline Beecham in 2000.
“These are allegations we take extremely seriously … We are investigating this internally and we will review this on a European wide basis,” Christopher Viehbacher, President of European Pharmaceuticals at GlaxoSmithline told the BBC’s World Business Report.
Munich’s chief prosecutor Manfred Wick said GSK offered money, free trips and other benefits to about 4,000 hospital doctors, and that there were suspicions of bribery and tax evasion.
The prosecutor said cash sums ranged from 50 to 25,000 euros (£30 to £15,400).
GSK said it had offered the prosecutor “active support” but had “no further information, beyond what is already presently in the media”.
“Two years ago the police came in on some suspicion of commercial activities and carted away 600 files and in the last two years have been going through those,” said Mr Viehbacher.
The accusations cover the period from 1997 to 1999, the company said in a statement.
“The company has been newly restructured through the merger of Glaxo Wellcome and SmithKline Beecham and many positions have been newly defined and filled; responsibilities have changed,” added the statement.
The prosecutor’s office in the Bavarian capital Munich said in a statement it had uncovered evidence of 5,900 instances where SmithKline Beecham had illicitly paid for doctors to take business and training trips.
“The gifts amounted to several thousand marks, in some cases between 10,000 and 50,000 marks (£3,150 and £15,750),” it said.
The majority of individual cases had been dropped due to the small sums involved, but 100 cases against doctors and 380 involving SmithKline employees were being pursued, the prosecutor said.
Mr Viehbacher said the 380 SmithKline employees “pretty much would represent our field force prior to the merger”.
And after you have a look at that outrageous obscenity..
Have a look at GSK’s apology letter to the Chinese people for illegally bribing doctors in their country… bear in mind this is an apology to over one billion people… GSK don’t do things by halves do they?….
GlaxoSmithKline’s bribes are evidence that Big Pharma isn’t working
Philip Ball The inadequacies of relying solely on market forces for our drugs are clearer than ever. This scandal should prompt a rethink
Wednesday 4 July 2012 14.45 BST Last modified on Wednesday 21 May 2014 05.11 BST
Perhaps the most shocking thing about the latest GlaxoSmithKline drug scandal is that malpractice among our overlords still has the ability to shock at all. Yet despite popular cynicism about doctors being in the pockets of the drug companies, there remains a sense that the people responsible for our healthcare are more principled and less corruptible than expenses-fiddling politicians, predatory bankers, amoral media magnates and venal police.
If this were a junk food company lying about its noxious products, or a tobacco company pushing ciggies on schoolkids, we’d be outraged but hardly surprised. When a major pharmaceutical company is found to have been up to comparable misdemeanours – bad enough to warrant an astonishing $3bn fine – it seems more of a betrayal of trust.
This is absurd, of course, but it shows how the healthcare industry benefits from its proximity to the Hippocratic oath. “Do more, feel better, live longer” GSK purrs. How can we doubt a company that announces as its priorities as “improving the health and wellbeing of people around the world” and “being open and honest in everything we do”?
Now GSK admits that, in effect, it risked damaging the health of people around the world, and was secretive and fraudulent in some of what it did. Among other things, it promoted antidepressant drug Paxil, approved only for adults, to people under 18. It marketed other drugs for non-approved uses; it suppressed scientific studies that didn’t suit (for example over the heart attack risks of its diabetes drug Avandia), and over-hyped others that did. It also hosted outings for doctors in exotic locations and showered them with perks, knowing that this would boost prescriptions of its drugs.
British drug giant GlaxoSmithKline will come under more pressure from prosecutors in the UK and US after admitting that it is investigating bribery allegations in several countries, legal experts have said.
The drug maker has, within the last two weeks, been forced to admit it is looking into bribery allegations in four countries: Poland, Iraq, Jordan and Lebanon.
These admissions come months after the company became embroiled in a major bribery scandal in China, where it was accused of funnelling as much as £320m to doctors and government officials to boost sales. GSK has said it is co-operating with the Beijing authorities’ investigation.
If the allegations are successfully prosecuted abroad, GSK may also have breached the UK’s powerful bribery laws. Britain’s Bribery Act, which counts failure of a company to prevent bribery as an offence, can be applied to domestic companies operating abroad and foreign companies with a presence in the UK.
Reuben Guttman, a director of US law firm Grant & Eisenhofer, said GSK could also be vulnerable to prosecution under America’s anti-corruption laws.
“GSK is a company that trades on our exchanges; a determination that it had engaged in bribery of foreign officials would have implications under the US Foreign Corrupt Practices Act,” he said.
“This means GSK could be subject to monetary penalties in the US and claims could be brought by the SEC or the Justice Department,” Mr Guttman added, pointing out that in the past “sanctions have been in the millions of dollars”.
Nathan Peacey, regulatory partner at law firm Bond Dickinson, said Britain’s Serious Fraud Office was likely to be considering action against the drug maker.
“The SFO is keen to create the impression that they have a number of ongoing investigations and that we can expect to see prosecutions in the not too distant future,” he said.
Mr Peacey said that if GSK was charged by the SFO, the most likely outcome would be a deferred prosecution arrangement (DPA), a new sentencing option which holds back prosecution as long as the company agrees to take certain measures to address any issues. DPAs were introduced in February as an alternative to prosecution, which under the Bribery Act could involve a ban from public contracts.
“The public interest in prosecuting and debarring GSK, one of the UK’s flagship companies, from selling medicines to hospitals the world over has got to be very questionable. If it turned out there were grounds to prosecute, GSK should surely be a prime candidate for a deferred prosecution agreement,” said Barry Vitou, corporate crime partner at law firm Pinsent Masons.
The SFO has not yet launched an investigation into GSK, a necessary prerequisite to charging the company, and will neither confirm nor deny its interest in the drug maker. However Glaxo has said it is in contact with both the SFO and the Department of Justice (DoJ) in the US “as appropriate”, and legal experts believe the authorities have been following the case with interest.
“The reality is that to all intents and purposes GSK is subject to regulatory scrutiny already. GSK is firmly in the cross hairs of the SFO and DoJ,” said Mr Vitou.
“Against this backdrop, a formal SFO investigation is more form over substance at this point. Whether or not GSK is a potential target for prosecution will, of course, be dependent on the actual conduct and not newspaper stories,” he added.
GSK has insisted that it does not have a systemic bribery problem, and that any wrongdoing it has unearthed was by rogue salesmen working outside the company’s control processes.
The company has also pointed out that the number of cases of sales and marketing misconduct it faces are “very similar to those reported by other companies in our sector”.
Legal experts, however, have said recent media attention on Glaxo could nonetheless make it more vulnerable to scrutiny from prosecutors.
“The problem GSK has is that it is a business under the spotlight. In that context, it [the news flow] is extremely unhelpful,” said Mr Vitou.
Mr Peacey added that the growing list of countries where GSK is investigating alleged bribery “makes it feel like it will be harder for them to demonstrate a single isolated incident”.
The company has admitted that its own investigation into the allegations unearthed evidence of wrongdoing by a handful of sales staff, but maintains they worked outside GSK’s control systems. It has called the allegations “shameful” and said it is cooperating with the ongoing Chinese investigation. The scandal has hit sales of GSK products in China, where it makes around 3pc of global revenues.
Chinese authorities last summer accused GlaxoSmithKline of bribing doctors. Bloomberg News
GlaxoSmithKlineGSK.LN -1.51% PLC is investigating allegations of bribery by employees in the Middle East, according to emails reviewed by The Wall Street Journal, opening a new front for the company as it manages a separate corruption probe in China.
A person familiar with Glaxo’s Mideast operations emailed the U.K. drug company late last year and earlier this year to report what the person said were corrupt practices in Iraq, including continuing issues and alleged misconduct dating from last year and 2012.
The emails cite behavior similar to Glaxo’s alleged misconduct in China, including alleged bribery of physicians.
Chinese authorities last summer accused Glaxo of bribing doctors and since have been investigating the company. China said last July that it had detained four of Glaxo’s senior Chinese staff, but none has been charged. Glaxo says it appears that some its senior staff in China may have broken the law and that it is cooperating with the investigation. The company has cut some staff in China in connection with the inquiry, a person familiar with that matter said.
Glaxo said it takes all of the allegations seriously and started investigating the Iraq matters as soon as it became aware of them. The investigations are continuing.
The person familiar with Glaxo’s Mideast operations emailed the company saying, “I believe GSK practices in Iraq violate the FCPA and the U.K. Bribery Act.” The U.S. Foreign Corrupt Practices Act addresses bribery of foreign officials by U.S. businesses or foreign corporations trading securities in the U.S.
In an email, the person said Glaxo hired 16 government-employed physicians and pharmacists in Iraq as paid sales representatives for the company while they continued to work for the government.
A government-employed Iraqi emergency-room physician has prescribed Glaxo products, even when they weren’t in the hospital’s pharmacy and a competitor’s brand was in stock, an email from the person said.
Glaxo has been hiring government-employed Iraqi doctors as medical representatives and paying their expenses to attend international conferences, the person alleged in the emails. Glaxo pays other doctors high fees to give lectures in exchange for promoting and prescribing its drugs, the allegations continued.
After Glaxo won a contract with the Iraqi Ministry of Health in 2012 to supply the company’s Rotarix vaccine, Glaxo paid for a workshop in Lebanon for Iraqi Ministry of Health officials, the email said. That included paying for a doctor’s family to travel to Lebanon “so it would be a family vacation for him at the hotel.”
The emails to Glaxo said that the person planned to share the information with the U.S. Justice Department and the Securities and Exchange Commission. The agencies declined to comment.
A new whistleblower program at the SEC, established in 2010 with the passage of theDodd-Frank financial-reform act, provides cash incentives for employees to report securities violations, including breaches of the FCPA. If the SEC gets involved and finds wrongdoing after a whistleblower complaint, the person stands to gain as much as 30% of any monetary sanction the agency recovers.
Glaxo has disclosed in SEC filings that the Justice Department has been investigating the company since 2011 as part of an industrywide bribery probe into pharmaceutical companies. It was unclear if the Justice Department is investigating the allegations in China or those raised by the person in the Mideast.
Glaxo responded to the emails, saying the allegations were being taken seriously. “Our collection and analysis of data continues and the scope of the investigation now covers several countries and business units” in the Gulf and Near East region, said a March 13 email from Glaxo’s head of compliance investigations to the person. The Glaxo region includes the nine countries of United Arab Emirates, Qatar, Bahrain, Oman, Kuwait, Lebanon, Syria, Jordan and Iraq.
“We have members from Legal (internal & external), Compliance, Corporate Security and ABAC working on this as a team with the full support of the Corporate Executive Team and Board members,” the email from Glaxo’s compliance head said. ABAC stands for antibribery and corruption, according to an earlier email from the same person. “This is a substantial piece of work to undertake both in volume and complexity so it will continue to take some time to complete.”
The drug maker has zero tolerance for unethical or illegal behavior, has strict controls in place globally with regard to compliance matters, bribery and corruption, and takes the allegations seriously, Glaxo said in a statement to the Journal. Glaxo has reinforced governance requirements in Iraq, including those covering payments to doctors and travel agencies, provision of samples and processes around public-tender submissions like the awarding of government vaccine contracts, the statement said.
The company has also put a temporary stop to all interactions between Glaxo and government officials in the region, “to ensure any activity is in compliance with our policies and procedures,” Glaxo said.
Glaxo said in December that it was stopping all payments to doctors to attend conferences or speak about its drugs—a policy it expects to be in place globally by 2016.