CRIME

Shanghai travel agent's revenue surge led to arrests in GSK bribery case

PUBLISHED : Monday, 15 July, 2013, 3:42pm
UPDATED : Tuesday, 16 July, 2013, 7:25am

The "abnormal" business activities of an obscure Shanghai travel agency provided the first clue to a bribery scheme that has resulted in the detention of several senior executives of GlaxoSmithKline, authorities said yesterday.

The company, Shanghai Linjiang International Travel Agency, had seen a sudden explosion in revenue - nearly all of it from pharmaceutical companies like the British drug giant.

Police investigations discovered that agency was one of numerous firms being used by GSK to funnel nearly three billion yuan (HK$3.8 billion) in kickbacks to doctors, hospitals and other groups, who prescribed their drugs, authorities said.

In turn, GSK managers also took kickbacks from the travel agencies, including hiring women to provide "sexual bribery" to managers at the drug maker, authorities said.

"GSK has been transferring money to more than 700 travel agencies and consulting firms since 2007," said Gao Feng , head of economic crime investigations for the Ministry of Public Security. "We have plenty of reasons to suspect that these money operating activities were illegal.

"Several travel agencies … used not only money to bribe GSK executives, but also pretty women to bribe them," Gao said.

Xinhua said that at least four executives from GSK's Chinese subsidiary had been detained, including vice-president and business operations general manager, Liang Hong ; vice-president and human resources supervisor, Zhang Guowei ; legal affairs supervisor, Zhao Hongyan ; and business development general manager Huang Hong .

The company issued a statement from its London headquarters yesterday, saying it would co-operate fully with Chinese authorities in the investigation.

"We will take all necessary action required by the outcome of this investigation," the spokesman said. "We have put an immediate stop on the use of travel agencies identified so far in this investigation and we are conducting a thorough review of all historic transactions related to travel agency use."

Despite the investigation in China, GSK's share price in New York rose to US$52.72 yesterday from US$49.06 on June 24. Its London shares rose to 1,739 pence yesterday from less than 1,600 pence on June 24.

Founded in 2006, Shanghai Linjiang first raised eyebrows after its annual revenue rose to more than 100 million yuan last year, Xinhua reported. Police said the firm barely offered any tour services aside from its work for pharmaceutical companies.

"We have been engaged in investigating this case for half a year and we initiated the investigation, rather than it being sparked by a tip-off as has been speculated by the public," Gao said.

The travel agency's legal representative Weng Jianyong , who is also under detention, was quoted by Xinhua as confirming that the company had organised numerous conferences and training events for GSK since 2009. He admitted that the company had sent kickbacks of more than 20 million yuan "through various channels" to GSK executives.

The announcement follows the detention of numerous GSK managers and police raids on several travel agencies in Shanghai, Changsha and Zhengzhou . In a statement last week, the ministry said some executives at a GSK mainland unit had used false tax receipts to get cash for bribe activities.