UK launches investigation into GlaxoSmithKline in wake of graft probes

Serious Fraud Office launches formal criminal investigation into the leading British drug company's sales practices in several countries

PUBLISHED : Wednesday, 28 May, 2014, 9:35am
UPDATED : Thursday, 29 May, 2014, 6:13pm

The British Serious Fraud Office has opened formal criminal investigation into the commercial practices of GlaxoSmithKline in "numerous" countries.

"We are looking at possible patterns across numerous global jurisdictions. Media reports and developments in China have not triggered our announcement. We have been looking at this for some time and it's coincidental that our investigation, which has been in the intelligence phase until now, has now moved to a formal investigation," said a source close to the investigation who spoke with the South China Morning Post on condition of anonymity.

The official said the SFO welcomed inside information on GSK from whistle-blowers.

GSK faces corruption claims in China, Jordan, Lebanon, Iraq and Poland. The drug giant, listed in London and New York, is subject to oversight by anti-corruption bodies of both jurisdictions.

"The SFO, like its counterpart in the US, has been monitoring GSK's situation in China for evidence supporting any violation of the Bribery Act. The US and UK authorities will be extremely interested in the evidence that the Chinese prosecutors present," said Daniel Roules, a Shanghai-based partner of US law firm Squire Sanders.

On May 14, the Ministry of Public Security accused GSK's former China business chief Mark Reilly of not only being involved in the bribery of officials, but also of covering up the bribery. It alleged that Reilly, GSK vice-president Zhang Guowei and legal affairs supervisor Zhao Hongyan bribed Chinese officials to block a government investigation into the company.

If the SFO found evidence of misconduct by any member of the GSK management in China, the risk of it prosecuting GSK in Britain would increase, Roules said.

Given that Reilly faces such allegations, if these were proven true, the implications could be severe not only for GSK's local team but also its offshore management, Roules said.

"The involvement of a senior officer of a UK company in bribery activities would be of concern to the SFO and makes it harder for the company to establish it had adequate procedures in place to prevent bribery," said Andrew Dale, a partner at international law firm Orrick.

GSK last month confirmed it was investigating allegations of corruption against "a small number of individuals" in Jordan and Lebanon.

"Where companies have been found to have significant corruption issues across more than one jurisdiction, it becomes more difficult to convince the authorities of the isolated nature of the activity. It raises concern that deficiencies in corporate controls may be endemic across the organisation," said Keith Williamson, the head of forensic and dispute services for Asia at Alvarez & Marsal.

"GSK is committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO," the company said on its website.