GlaxoSmithKline

The London-based multinational drugmaker, also known as GSK, supplies key products such as vaccines in China, as well as drugs for lung disease and cancer. In 2013, the company was targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.

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Risk of UK and US action hangs over GSK

With listings in London and New York, the drug giant could face further investigations if its executives are convicted of bribery on the mainland

PUBLISHED : Wednesday, 24 July, 2013, 12:00am
UPDATED : Wednesday, 24 July, 2013, 3:53am
 

British drug giant GlaxoSmithKline (GSK), which is embroiled in a graft scandal on the mainland, risks becoming the first large multinational to be charged under Britain's Bribery Act, said Rob Morris, the managing director of advisory firm AlixPartners.

No big company had been charged under the act since it came into force two years ago, Morris said.

"There had been a minor prosecution under the UK Bribery Act of a court clerk found guilty of accepting bribes, but major corporations have not been prosecuted, although there apparently are a number of large investigations currently being undertaken," he said.

If a British company's executives are found guilty of bribery in another country, it can be investigated by Britain's Serious Fraud Office.

Mainland authorities have accused GSK of using mainland travel agencies to funnel nearly 3 billion yuan (HK$3.8 billion) in kickbacks to doctors, hospitals and other groups who prescribed its drugs.

"The UK Bribery Act refers to corruption that would appear to be relevant to allegations in the GSK case," Morris said. "The UK Bribery Act applies to the bribery of not only government officials but also private individuals."

The act also covered third parties, such as the travel agencies allegedly used by GSK, that conducted bribery on a company's behalf, said Hugo Williamson, the managing director of consultancy Risk Resolution Group.

Morris said the act did provide a defence for companies. If the firm had adequate procedures to prevent corruption, it need not be charged under the act.

Adequate procedures required companies to have robust policies, controls, training, investigation and disciplinary action to combat corruption, he said.

"If the bribery case was found to be an isolated incident by a bad apple in the barrel and the company had the necessary policies and procedures to support the case that the company has zero tolerance towards corruption, then that can be a defence against prosecution under the UK Bribery Act," he said. "However, if GSK's internal investigations against wrongdoing were found to be faulty and its internal controls weak, that would increase GSK's exposure to the UK Bribery Act."

Williamson said: "The size of the alleged bribery by GSK will likely have SFO asking how such a situation could have occurred and what processes were in place to prevent such an occurrence."

He said that if GSK was found guilty under the act, "the penalties can be serious, with unlimited fines and up to 10 years' jail for senior managers".

Williamson said GSK, as a company listed in London and New York, also risked being charged under the United States' Foreign Corrupt Practices Act if its executives were found guilty of bribery on the mainland.

The US law had been in force since 1977, he said, but the authorities had toughened it up in November, making it easier for the government to act against companies in foreign countries.

An American had been detained in Shanghai in connection with the investigations into the pharmaceuticals industry on the mainland, Reuters quoted US embassy official Nolan Barkhouse as saying yesterday.

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