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July 15, 2013

Drug Company Executives Detained in Chinese Bribery Probe

by VOA News

China has detained four executives of British drug maker GlaxoSmithKline for alleged bribery as part of a series of Chinese investigations of foreign companies accused of illicit dealings in the country.

The Chinese Ministry of Public Security identified the four detained executives on Monday, saying they are Chinese nationals with senior management roles at GSK's Chinese division.

Chinese state media said last week that GSK executives were under investigation for bribing doctors, hospitals, government officials and others to boost sales and raise prices of GSK pharmaceutical products in China.

Public security ministry official Gao Feng provided details of the alleged bribery scheme in a briefing to reporters on Monday. He said Chinese police suspect the GSK managers of colluding with 700 travel agencies and other companies to channel bribes to the Chinese medical personnel and officials.

Gao said authorities were investigating transactions between GSK and its alleged co-conspirators going back to 2007, with the deals having a total value of up to half a billion dollars.

GSK's London headquarters issued a statement expressing disappointment at what it called "serious allegations of fraudulent behavior and ethical misconduct" by  employees and third parties.

GSK pledged to cooperate fully with the Chinese investigation and said it acted immediately to stop working with the Chinese travel agencies identified in the investigation so far.

Last week, the British firm said it had found "no evidence of bribery or corruption" by its staff in dealings with Chinese doctors and officials.

Chinese state television broadcast footage of police questioning one of the detained GSK executives in the south-central city of Changsha on Monday.

Authorities also allowed a state television reporter to speak to the executive, GSK China vice president and operation manager Liang Hong. He told the reporter that his company used the Shanghai Linjiang International Travel Agency to channel funds meant for "dealing with government departments." He did not explicitly admit to bribery.

In a separate report, state news agency Xinhua said it interviewed an employee of the travel agency mentioned by Liang. It said agent Weng Jianyong admitted to accepting business opportunities from GSK China in return for paying kickbacks to the GSK managers.

Xinhua quoted Weng as saying Liang used some of the kickbacks to cover the cost of bribing Chinese officials and health experts to boost GSK's own business.

China has targeted several foreign companies for investigation in recent months on suspicion of price-fixing and other violations of consumer rights.

The targeted companies include European food makers Nestle and Danone, which are under Chinese scrutiny for allegedly setting artificially high prices for infant milk formulas.