Chinese Law Possibly Broken By GlaxoSmithKline Executives (NYSE:GSK)

GlaxoSmithKline has announced that some of its executives might have broken the law in China. The company is currently under investigation for a bribery and corruption scandal that has engulfed its China operations. Investigators say that a small Shanghai travel agency worked with Glaxo to bribe doctors, hospitals and government officials. The British pharmaceutical giant released a statement about the investigation after three top Glaxo executives met with Chinese investigators.

For the past few weeks, Glaxo has been under intense scrutiny. Investigators recently raided the company’s offices in China looking for evidence of wrongdoing. Investigators have also detained four of Glaxo’s senior executives on suspicion of bribery and tax fraud. A few weeks ago, executives at Glaxo said that they conducted an internal investigation into allegations of bribery and fraud in the China operations this year and found no evidence of wrongdoing.

When Chinese investigators raided the Shanghai Linjiang International Travel Agency, a small travel agency in Shanghai, they found that the agency appeared to be using fake contracts and travel invoices to help executives at GlaxoSmithKline bribe doctors, hospitals, foundations and government officials. The records included invoices for hotel bookings, travel visas and airline tickets to Chinese cities, and to Australia, Italy, Japan, Korea and the United States. The police shut down the agency soon after and detained its boss, Weng Jianyong, along with four Chinese-born Glaxo executives.

Abbas Hussain, a Glaxo executive, released a statement regarding the allegations, saying: “Certain senior executives of GSK China who know our systems well appear to have acted outside of our processes and controls, which breaches Chinese law. We have zero tolerance for any behavior of this nature.” He continued: “I want to make it very clear that we share the desire of the Chinese authorities to root out corruption wherever it exists. We will continue to work together with the MPS and we will take all necessary actions required as this investigation progresses.” His statement came after a meeting with China’s Ministry of Public Security, also known as the national police.

There have been signs that the actions of other drug makers could also come under scrutiny from the Chinese authorities. Drug makers Merck and Roche acknowledged that they had used the same small Shanghai travel agency referenced in the investigation against Glaxo. Drug company AstraZeneca recently said in a statement that one of its employees had been questioned by the police in Shanghai. The statement continued on to say, “We believe that this investigation relates to an individual case and while we have not yet received an update from the Public Security Bureau, we have no reason to believe it’s related to any other investigations.”