The Chinese government has publicly accused a British executive of GlaxoSmithKline (GSK) of bribing doctors to use its drugs and then trying to cover up his activities during a subsequent investigation.
If convicted, Mark Reilly, the former China head of GSK, could face a prison term - an extremely rare fate for a senior foreign executive on the mainland.
Police have completed a 10-month investigation into Britain's largest drug firm, the Ministry of Public Security said on its website yesterday. The ministry had passed the case to the Changsha People's Procurator in Hunan , which is reviewing the case, said a GSK spokesman.
Wang Bing, a Beijing-based partner with US law firm Faegre Baker Daniels, said: "British companies have strict ethical and anti-bribery rules. It is really mind-boggling how a British [executive] can behave like this. It is rare for a British [executive] to be involved in such a scheme in such a blatant manner."
The UK Serious Fraud Office is aware of the allegations against GSK but would neither deny nor confirm it was investigating the firm under the UK Bribery Act.
The Ministry of Public Security alleged that Reilly, GSK vice-president Zhang Guowei and GSK legal affairs supervisor Zhao Hongyan formed an emergency group in 2012 to bribe law enforcement and other officials in Beijing, Shanghai and elsewhere to block a government investigation of GSK.
"Reilly and other senior GSK executives proactively covered up the bribery activities and strongly maintained the financing channels through which the bribes were funnelled," the ministry alleged.
Reilly was replaced as GSK's China head last July.
The Ministry of Public Security alleged that from January 2009, with the support of other GSK executives like Zhang, Reilly set up sales units that gained billions of yuan in illegal income from bribing doctors, hospitals and health officials.
Since 2010, GSK's Chinese subsidiary GlaxoSmithKline (China) Investment (GSKCI) had spent tens of millions of yuan bribing hospitals to use GSK's liver drugs instead of Chinese-produced drugs, the Ministry of Public Security claimed. GSKCI spent 13 million yuan buying gifts like cars, television sets and video cameras, which were given as bribes to clients in health-care organisations, it said.
A GSK spokesman said: "We have today met with the Ministry of Public Security, which updated us on their investigation. We take the allegations very seriously. They are deeply concerning to us and contrary to the values of GSK."
The prosecution of foreign nationals by the Chinese authorities is likely to prompt or accelerate similar investigations by the regulators of other countries, said Keith Williamson, head of forensic and dispute services for Asia at Alvarez & Marsal, an international professional services firm.
As a British firm listed in London and New York, GSK is subject to the UK Bribery Act and US Foreign Corrupt Practices Act.
"The investigation and possible prosecution by the Chinese authorities of such a senior foreign national is likely to set alarm bells ringing for other senior foreign nationals in China and multinational companies," said Williamson.
Brent Carlson, a Hong Kong director of international business advisory firm AlixPartners, said: "The news is a reminder that China is serious about its crackdown on corruption."