GlaxoSmithKline Bribery Scandal: China Police Accuse Company of Organising Corruption [VIDEO]

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By Jerin Mathew | September 3, 2013 9:24 PM EST

A Chinese national flag is seen in front of a GlaxoSmithKline office building in Shanghai. (Reuters)

Chinese police investigating British drugmaker GlaxoSmithKline for alleged bribery and tax violations found that the crimes were organised by the company itself rather than individual staff members.

The official Xinhua news agency reported that Chinese police have revealed further details about the case after questioning more individuals. More people admitted to the "suspected transgressions", according to the state media news agency.

"As the investigation is moving on, it is becoming clear that it is organised by GSK China rather than drug salespeople's individual behaviour," Xinhua reported.

The allegation comes as the company accused some staff in China for the wrongdoings, saying it had no prior knowledge about the situation.

'Dubious Corporate Behaviour'

The news agency reported allegations that every sales team at GSK China has almost 10m yuan ($1.6m, £1m, €1.2m) of "public relations funds" for bribing key staff in major hospitals.

A high-ranking official at GSK China, cited by the agency, said the British parent assigned growth targets as high as 25%, up 7 to 8 percentage points more than the average industry growth.

Furthermore, the parent company's salary policy was closely linked to the sales volume.

The official, who is called Huang Hong and is currently detained by authorities probing the scandal, admitted that such a high sales growth rate could not be reached without "dubious corporate behaviour".

In order to achieve their sales targets, the salespeople appear to have broken China's laws prohibiting bribery, Xinhua reported.

Police also allege that their probe found GSK China went through the motions in internal auditing to hide the violations from the part of the company.

"We remain deeply concerned by the allegations of fraudulent behaviour and ethical misconduct in our China business," said a GSK spokesman.

"The reports published today relate to the on-going investigation being conducted by the Chinese authorities. The issues identified would be a clear breach of our corporate values and we have zero tolerance for any behaviour of this nature.

"As we said previously, we are fully cooperating with the investigation and we completely share the desire of the Chinese authorities to root out corruption wherever it exists. We will take all necessary actions as this investigation progresses."

Investigation into Allegations

GSK has been facing investigation in China into alleged malpractice by its executives.

China's Ministry of Public Security had accused unnamed GSK executives of routing 3bn yuan in bribes to doctors through 700 travel agencies and consultancies over six years.

In connection with the allegations, Chinese authorities have taken several GSK executives into custody and claimed that a number of them had admitted to criminal charges of bribery and tax law violations.

Earlier, A British-American couple who were detained in China as part of the corruption probe have confessed to their illegal acts and apologised to China's government.

The company has previously admitted that some Chinese executives appeared to have broken the law, but CEO Andrew Witty said that their head office had no prior knowledge about the wrongdoing.

"It appears that this is a consequence of some individuals working outside of the controls and processes of the company to defraud the company as well as to then go on and do things which are potentially illegal," Witty said earlier.

The company had also hired law firm Ropes & Gray to carry out an independent investigation into the case.

French drugmaker Sanofi, Switzerland's Novartis and US drug giant Eli Lilly are among foreign firms facing bribery allegations in China.

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