Thursday, May 29, 2014

GlaxoChinaGate - Department of Irony contd.

By Patti Waldmeir in Shanghai and Andrew Ward in London

GlaxoSmithKline, the UK pharmaceutical company at the centre of a Chinese corruption scandal, is facing protests from junior employees who say the company is refusing to reimburse them for bribes they were ordered to pay by their superiors.

Beijing officials have accused senior employees at GSK’s China subsidiary of orchestrating a “massive and systemic bribery”, while the company was notified earlier this week that Britain’s Serious Fraud Office has opened its own criminal inquiry.

Now some Chinese sales staff are complaining that GSK has denied bonuses, threatened dismissal or refused to reimburse them for bribes they say were sanctioned by their superiors to boost the company’s drug sales. In some cases, managers instructed them to purchase fake receipts that were used to cover up bribes paid in cash or gifts to doctors and hospitals, according to salesmen interviewed by the Financial Times.

In some instances, managers disguised their involvement by using their personal email address to instruct staff to pay bribes and by ordering junior staff to claim on their personal expense accounts – even if the bribe was actually paid out by the manager – according to these people.

In late March, disgruntled staff sent 25 representatives to GSK’s headquarters in Shanghai, where they unfurled a banner that read: “Return my hard-earned money.” The amount owed totals tens of thousands of renminbi for many of the affected employees. Most claims cover the months before Beijing announced it was investigating GSK last July.

”All the expenses were approved by the company,” the group wrote in a letter to management.

“The expenses were paid with our own money, and although the receipts were not compliant, it was our managers who told us to buy the fake receipts,” said one former GSK salesman.

In China, restaurants issue a standardised official receipt for meals and other sales, but there is a brisk business in China of faking such receipts.

GSK has stepped up scrutiny of staff expense claims in China with help from auditors Ernst & Young since the scandal erupted. Staff were instructed to produce bank records to prove that they paid amounts directly to merchants. Those who were unable to do so, or who provided receipts that could not be authenticated by the tax office, were denied reimbursement and their year-end bonuses.
Some staff were warned not to implicate their supervisors, according to a former salesman: “Our manager approached each person before they were questioned and asked them not to mention his name. He even prepared a story for them to tell the investigator.”

GSK said: “We have zero tolerance for unethical or illegal behaviour and anyone who conducts such behaviour has no place in our company. We believe the vast majority of our employees uphold our values and we welcome employees speaking up if they have concerns.”

The company acknowledged in April that a “very small number” of its 7,000 Chinese employees had been dismissed following an audit of expense claims.
“Where we have found potential issues, we have thoroughly reviewed them and have withheld payments and taken disciplinary action including dismissal where appropriate. We are determined to ensure our processes are being properly followed.”

The case has cast a cloud over GSK and caused a sharp sales drop in China – an important growth market for the company. In a bid to repair the damage, Sir Andrew Witty, chief executive, late last year announced an overhaul of marketing practices, including an end to target-based pay for sales representatives.

Additional reporting by Zhang Yan in Shanghai

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