Drugmaker GSK says fined $619 million in China graft probe

Drugmaker GSK says fined $619 million in China graft probe

BEIJING - A Chinese court on Friday fined British drugmaker GlaxoSmithKline 3.0 billion yuan (S$619 million) following a nearly year-long bribery probe, the company said.

The firm's former head of China operations, Mark Reilly who would be deported, and four other ex-officials were given suspended sentences of between two and four years in prison, the official Xinhua news agency said.

The fine levied by the Changsha Intermediate People's Court after a closed hearing in central Hunan province was the largest ever handed down by a Chinese court, according to Xinhua.

It equals the precise amount that China's ministry of public security said last year had been funnelled between GSK and travel agencies since 2007.

Police allege that GSK took kickbacks from travel agencies to organise conferences that never took place.

The company also "resorted to bribery to boost sales of its medical products and sought benefits in an unfair manner," the court said in a statement, according to Xinhua.

"GSK bribed, in various forms, people working in medical institutions across the country, and the amount of money involved was huge. Five senior executives actively organised, pushed forward and implemented sales with bribery," the court statement added.

The firm said in a statement that the court had found it guilty of "bribing non-government personnel".

'Clear breach' of governance

In an apology posted on its website, GSK said that the illegal activities of the firm's China arm "are a clear breach of GSK plc's governance and compliance procedures; and are wholly contrary to the values and standards we expect from our employees".

The firm "must work hard to regain the trust of the Chinese people", it added.

According to Xinhua, Reilly was given three years in prison but will receive a four-year reprieve and be "expelled" from China. It did not provide further details.

Three other GSK officials - former human resources director Zhang Guowei, former vice president Liang Hong and former legal affairs director Zhao Hongyan - received sentences and reprieves of two to three years, Xinhua said.

The firm's former general manager for business development, Huang Hong, was found guilty of "bribing and receiving bribes" and received a sentence of three years, which will be suspended for four years, according to Xinhua.

The court decided to reduce the jail sentences for the five "since they confessed the facts truthfully and were considered to have given themselves up," Xinhua reported.

After being detained by Chinese authorities last year, Huang was quoted in state media as saying that GSK had set up a special team to handle important clients which had an annual "relations" budget of nearly 10 million yuan ($1.6 million).

Sales growth targets set by the firm as high as 25 per cent put pressure on employees, Xinhua quoted Huang as saying.

Neither the statement nor the apology mentioned the sentencing of Reilly or other officials.

The verdict comes more than a year after Chinese police first accused Reilly of ordering employees to bribe hospitals, doctors and health institutions to gain billions of dollars in revenue.

China's healthcare sector is widely considered to be riddled with graft, partly the result of an opaque tendering system for drugs, and also due to doctors' low salaries.

GSK is the most high-profile target of wide-ranging Chinese inquiries into foreign pharmaceutical firms, as Beijing also mounts probes into overseas companies in sectors ranging from cars to baby milk.

The investigations come against the backdrop of an anti-graft campaign backed by President Xi Jinping to root out official corruption.

Reilly is not the only non-Chinese national to have been ensnared in the probe.

Last month, a Shanghai court sentenced British investigator Peter Humphrey and his American wife Yu Yingzeng to two-and-a-half years in jail for breaching privacy laws.

The investigators had been hired by GSK to investigate the source of a lurid sex tape of Reilly shortly before the probe went public.

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