GSK’s former China head charged with bribery

Chinese police on Wednesday charged the former China head of British drugmaker GlaxoSmithKline Plc Mark Reilly and two Chinese executives of GSK with corruption, after a probe found the firm bribed doctors and hospitals using billions of yuan generated through elaborate schemes.

Police also suspect Reilly and two of his Chinese colleagues, Zhang Guowei and Zhao Hongyan, of bribing officials in the industry and commerce departments of Beijing and Shanghai, the official Xinhua news agency reported, quoting police in Hunan province.

While no specific details about the amount of bribes paid or the amount the company earned illegally, Chinese officials had previously accused the firm of funneling up to 3 billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials.

The case is also the biggest corruption scandal to hit a foreign company in China since the Rio Tinto affair in 2009, which resulted in the jailing of four executives, including an Australian, for periods ranging from seven to 14 years.

"(GSK) departments offered bribes to hospitals and doctors as well as personnel to boost their sales. The money involved was in the billions of yuan," a ministry of public security official told a press conference in Beijing (See: China accuses GSK of bribery, raising prices and tax fraud).

The bribery charges, which carry a maximum punishment of life term in prison are seen as harsher than expected by many in the industry and other China-based foreign executives.

GSK, the UK's biggest drugmaker, said the case was deeply concerning.

"We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK," the drugmaker said in a brief statement issued in London.

Reilly briefly left China when the scandal broke in July last year but voluntarily returned to cooperate with police.

"We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens."

GSK has said that some of its senior Chinese executives appeared to have broken the law. It has also said it has zero tolerance for bribery, calling the allegations in China "shameful" (GSK's statement on media reports on misconduct of employees).

Shares GSK were trading down 1.2 per cent, underperforming a 0.2 per cent drop in the broader FTSE 100 index.

 (Also see: After China, Iraq, Poland, GSK bribery probe now expands to Jordan, Lebanon)