The pharmaceuticals group is also understood to be speaking to Downing Street and the Foreign Office over the allegations, which it has described as “shameful”.
GSK’s heightened contact with the British authorities comes after it uncovered evidence that appears to support some of the allegations it has been facing in Beijing.
The findings suggest senior executives in China were involved in an orchestrated attempt to falsify invoices, pay sweeteners to third parties and siphon off payments for their own use, as revealed in The Daily Telegraph yesterday.
The drug maker is facing a mounting crisis in China after the country’s authorities revealed police were looking into deals worth 3bn renminbi (£320m), which could go back as far as 2007.
The allegations centre on GSK’s use of “travel agencies” in China which organise conferences for doctors and are a highly competitive business.
The Chinese authorities claim the company used some 700 agencies as middlemen to funnel money to health officials and doctors in order to win market share and clinch higher prices. GSK believes the figure is far lower and says it only has relationships with between 20 and 25 agencies.
Four senior staff, all Chinese nationals, are under arrest, and one appeared to make a public confession on state television last week. Chinese police claim the others have also confessed to the charges.
Yesterday, it was reported that a British contractor had been detained as part of the investigation. The person, who has not been named, does not appear to have worked directly for GSK.
Tens more GSK workers are under house arrest, and one British executive, Steve Nechelput, the company’s finance director in China, is forbidden from leaving the country.
The Chinese authorities have prevented GSK from contacting the four detainees, but it is understood the same four are the focus of the drug maker’s own inquiry.
On Friday, GSK dispatched Abbas Hussain, its president of emerging markets, to China to deal with the unfolding crisis along with the company’s global head of internal audit and a senior legal official.
The pharmaceuticals group has also hired auditors Ernst & Young to carry out an independent review of its systems in China. GSK believes the alleged fraud only involved a fraction of the 3bn renminbi figure provided by the Chinese authorities.
Nonetheless, senior figures close to the company’s inquiries in China have revealed that the business now expects to face fines which could total tens of millions of pounds, as well as criminal trials for the individuals involved. The position, though, is still described as “fluid”.
The Serious Fraud Office has not launched a formal investigation but is understood to be conducting a preliminary review into the allegations. It could ultimately apply its own sanctions, as could the Department of Justice in America.
Under Chinese law, senior managers can also receive penalties as representatives of the company. These could be non-Chinese executives if they are present in China and within the jurisdiction of the Chinese courts, according to Eugene Chen, compliance and investigations partner with Hogan Lovells in Shanghai.
GSK is also at risk of enforcement by UK and US authorities under tough bribery laws. As well as hefty fines, companies found guilty of corruption under Britain’s Bribery Act can be banned from public contracts in the UK, according to Barry Vitou, anti-corruption law expert at Pinsent Masons.
http://www.telegraph.co.uk/finance/newsbysector/epic/gsk/10192777/GlaxoSmithKline-briefs-
Serious-Fraud-Office-over-China-case.html
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