GLAXOSMITHKLINE PLC

Industry

Pharmaceuticals /Medical Devices /Health

Corporate Headquarters

London, Brentford, United Kingdom

Summary of Allegations:

Nationality of Foreign Officials: China

Summary of Allegations:

Between 2010 to June 2013, employees and agents of GlaxoSmithKline (China) Investment Co Ltd (“GSKCI”), wholly-owned indirect subsidiary of GlaxoSmithKline plc ("GSK"), and Sino-American Tianjin Smith Kline & French Laboratories Ltd (“TSKF”), joint venture between GSK, Tianjin Zhong Xin Pharmaceutical Group Corporation Ltd and Tianjin Pharmaceutical Group Co Ltd., allegedly provided bribes to Chinese public officials in order to increase sales of its pharmaceutical products. As part of the bribery scheme, bribes were allegedly paid to influence individual Chinese healthcare professionals writing prescriptions and hospital administrative staff responsible for product selection or purchase. The bribes were allegedly in forms of gifts, improper travel and entertainment with no or little educational purpose, shopping excursions, family and home visits and cash payments.

GSKCI allegedly utilized several methods to fund these improper payments to healthcare professionals.  During the relevant period, GSKCI allegedly spent nearly RMB 1.4 billion (USD 225 million) on planning and travel services provided through third party vendors. Also, GSKCI allegedly provided approximately RMB 14 million (USD 2.2 million), out of RMB 106 million (USD 17 million) in total spent as speaker fees, to speakers whose qualification as healthcare professional could not be verified. In addition, GSKCI allegedly used marketing programs to provide healthcare professionals with gifts such as laptops, tablets, and other electronic programs. Although the marketing program was purportedly for the purpose of providing clinics with tools to facilitate the storage and administration of vaccines that required refrigeration, the clinics were allegedly selected based on the potential to market additional GSK products. GSKCI allegedly paid out RMB 14.6 million (approximately USD 2.3 million) over the life span of the project.

GSK regional and district managers were allegedly aware of such improper practices. For example, a sales representative allegedly submitted a 2013 work plan to sales manager describing intent to pay and provide holiday gifts to a healthcare provider in exchange for guaranteed monthly prescription of more than 40 boxes of GSK product.

These payments were allegedly recorded in GSK’s books and records as legitimate expenses, such as medical association sponsorship, employee expenses, conferences, speaker fees, and marketing costs.

Approximate Alleged Payments to Foreign Officials: Unspecified amount of bribes in forms of gifts, improper travel and entertainment with no or little educational purpose, shopping excursions, family and home visits and cash payments.

Business Advantage Allegedly Obtained: Increased sales in China through increased prescriptions of GSK pharmaceutical products

Nationality of Foreign Officials: Iraq

Summary of Allegations:

On 6 April 2014, a person familiar with GSK's Mideast operations emailed the company saying, "I believe GSK practices in Iraq violate the FCPA and the U.K. Bribery Act." According to the Wall Street Journal, the person said that GSK hired 16 government-employed physicians and pharmacists in Iraq as paid sales representatives for the company while they continued to work for the government.

A government-employed Iraqi emergency room physician allegedly prescribed GSK products, even when they weren't in the hospital's pharmacy and a competitor's brand was in stock. The e-mail went on to say that GSK hired government-employed Iraqi doctors as medical representatives and paid their expenses to attend international conferences. GSK also allegedly paid other doctors high fees to give lectures in exchange for promoting and prescribing its drugs.

After GSK won a contract with the Iraqi Ministry of Health in 2012 to supply the company's Rotarix vaccine, GSK paid for a workshop in Lebanon for Iraqi Ministry of Health officials, the email alleged. That included paying for a doctor's family to travel to Lebanon "so it would be a family vacation for him at the hotel."

Approximate Alleged Payments to Foreign Officials: Employment, travel and fees to government-employed physicians

Business Advantage Allegedly Obtained: Promotion and prescription of GSK pharmaceutical products

Nationality of Foreign Officials: Jordan

Summary of Allegations:

According to e-mails first sent to the company in December, GSK sales representatives allegedly bribed doctors in Jordan to prescribe GSK drugs by issuing free samples that the doctors were then allowed to sell. GSK representatives also allegedly permitted Jordanian doctors to bring their spouses on business trips that GSK paid for, according to the emails.

According to the e-mails, doctors were issued with business-class tickets to attend conferences but would exchange them at travel agencies for two economy-class tickets, allowing their spouses or other family members to come along for free, a practice local GSK employees were aware of. It is against GSK policy to allow airplane tickets to be exchanged for tickets of a lower value or refunded.

The emails alleged that GSK sales representatives gave doctors in Jordan up to 60 free samples of its vaccine Synflorix, which they then sold on at up to USD 70 a vial.

Approximate Alleged Payments to Foreign Officials: Free samples, tickets for spouses/family members to travel with healthcare professionals

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: Lebanon

Summary of Allegations:

In Lebanon, GSK employees allegedly gave doctors free Synflorix vials as part of an incentive scheme to get them to prescribe the vaccine and not its competitors, according to a whistleblower e-mail to company representatives. GSK allegedly made payments to "key opinion-leader" doctors?influential and leading practitioners in their field?for lectures and other speaking engagements that may not have taken place, the emails allege, in return for them prescribing more drugs produced by GSK.

Approximate Alleged Payments to Foreign Officials: Free vials of a GSK vaccine

Business Advantage Allegedly Obtained: Prescriptions of the GSK vaccine

Nationality of Foreign Officials: Poland

Summary of Allegations:

GSK is facing criminal investigation in Poland for allegedly bribing doctors to promote its lung drug Seretide. GSK said the allegations related to the way a respiratory disease program was conducted in the Lodz region. The 2010-12 program centered on GSK's top drug Seretide, also known as Advair, which has worldwide sales of around USD 8 billion a year.

According to the BBC, one doctor has admitted guilt and has been fined and given a suspended sentence, after accepting 100 pounds (USD 170) for a lecture he never gave. The bribes allegedly involved 11 doctors and a GSK regional manager.

GSK said an internal investigation into the matter found evidence of inappropriate behavior by just one employee, whom it disciplined in 2011.

Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Sales of a GSK pharmaceutical product

Nationality of Foreign Officials: Romania

Summary of Allegations:

On 27 July 2015, a whistleblower sent a letter to company management alleging improper payments in Romania. GSK allegedly made improper payments of hundreds or thousands of euros to Romanian doctors to prescribe GSK's products, including treatments for Parkinson's and prostate issues. The improper payments allegedly consisted of payments for speaking engagements where the doctor did not actually speak, or spoke less times than the number of engagements paid for. Other alleged improper payments include payments for "participating" in advisory boards and for doctors to take international trips.

Approximate Alleged Payments to Foreign Officials: Payments for speaking engagements, travel and participation in advisory boards

Business Advantage Allegedly Obtained: Prescriptions of GSK pharmaceitucal products

Nationality of Foreign Officials: Syria

Summary of Allegations:

GSK announced it would be investigating a whistleblower report it received on 18 July 2014 addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK's audit committee. According to the e-mail, GSK employees paid incentives to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages. "GSK has been engaging in multiple corrupt and illegal practices in Syria and its internal controls for its Syrian operation are virtually non-existent," the email said.

In addition, the email said GSK had engaged in apparent Syrian export control violations, including an alleged smuggling scheme to ship the drug component pseudoephedrine to Iran from Syria via Iraq. Pseudoephedrine is regulated as a precursor for making methamphetamine.

The whistleblower's email alleged that GSK used its own employees and Syrian distributor Maatouk Group to make illicit payments. The email listed a range of alleged improper activities, including payments of USD 1,500 each to two doctors to promote Panadol. The document also highlighted bribes paid to pharmacists and payments for medics to visit a Mediterranean holiday resort.

Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Nationality of Foreign Officials: United Arab Emirates

Summary of Allegations:

On 7 October 2014, GSK began an investigation into allegations of corrupt payments in the United Arab Emirates following a whistleblower complaint. The company confirmed the investigation following the receipt of an email alleging improper payments, which was purportedly from a GSK sales manager in the United Arab Emirates.

Approximate Alleged Payments to Foreign Officials: Unspecified

Business Advantage Allegedly Obtained: Unspecified

Enforcement Results

Agencies: China: Ministry of Public Security

Results: Civil Penalty

Year Resolved: 2014

Compliance Monitor: N/A

Ongoing: No

Details:

On 22 July 2013, following a meeting with Chinese authorities, Abbas Hussain, GSK's President International, Europe, Japan, Emerging Markets & Asia Pacific, said, "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 behaviour of this nature. 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."

On 3 September 2013, Reuters reported that a Chinese police investigation claims the alleged bribery was coordinated by GSK, and not the work of a few individual employees. It reports that GSK implemented salary policies based on sales volumes and goals that could not be accomplished without "dubious corporate behavior."

On 19 September 2014, GSK agreed to pay an unprecedented USD 491.5 million to Chinese authorities after the company's Chinese subsidiary was found guilty of bribery. The ruling followed a one-day trial in Changsha, Hunan, and the penalty marks the largest corporate fine ever imposed in China.

GSK published an apology in Chinese to the Chinese government and its people on its website. And previously, in 2013, a confession by GSK's Vice President of China operations was broadcast on television.

Agencies: China: Ministry of Public Security

Results: Conviction, Prosecution of Individuals

Year Resolved: 2014

Compliance Monitor: N/A

Ongoing: No

Details:

In China, four GSK executives have been detained pursuant to the Ministry of Public Security's investigation of potential economic crimes. According to a Bloomberg News report from 15 July 2013, the executives are: Huang Hong (a GSK business development manager), Liang Hong (GSK's vice president and operations manager in China), Zhang Guowei (a GSK human resources director), and Zhao Hongyan (a GSK legal affairs director). According to the same story, all four executives are Chinese nationals. Bloomberg News also reported that the head of GSK in China, Mark Reilly, "returned to the U.K. on a routine, planned business trip and has been working from company headquarters on the response to the investigation."

On 16 July 2013, the Telegraph cited a statement from the Ministry of Public Security as saying that "[a]fter initial questioning the suspects have admitted to the crimes, and the investigation is ongoing." The Telegraph also reported that the vice president of operations in China, Liang Hong, who is one of the four detained executives, confessed to the crimes on a news broadcast on 15 July 2013.

The Guardian reported on 26 July 2013 that an additional group of eighteen or more GSK employees have been detained by the police in Zhengzhou. Additional details were unavailable.

On 14 May 2014, Chinese prosecutors filed criminal charges against Mark Reilly. Reilly allegedly ordered his sales teams to bribe doctors and hospitals to achieve the company's sales targets, according to police in Changsha, Hunan province. Two other GSK executives, allegedly helped execute the bribery scheme, which netted the company revenue worth billions of yuan. GSKs drugs in China cost more than those in other countries because the company allegedly inflated drug prices to recoup bribery funds, according to Chinese police.

Reilly was sentenced to three years in prison after allegedly ordering his sales teams to bribe doctors and hospitals to achieve the company's sales targets. Reilly received a three-year prison sentence that was suspended for four years; he will be expelled from China following the four-year suspended sentence.

Agencies: Internal Investigation

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

The Wall Street Journal reported on 7 July 2013 that GSK had begun investigating "allegations that sales personnel in China rewarded doctors with cash and perks for prescribing Botox, and allegedly tried to cover their tracks by using private email, as part of a broader probe into allegations of bribery that date back several years." According to the article, an anonymous tipster presented GSK with allegations that between 2004 and 2010 its China sales staff provided doctors with speaking fees, cash payments, dinners and all-expenses-paid trips in return for prescribing the drug company's products.

On 15 July 2013, GSK released a statement indicating the GSK is reviewing all third party agency relationships and have put an immediate stop on the use of travel agencies that have been identified so far in the Chinese allegations/investigation. GSK is conducting a thorough review of all historic transactions related to travel agency use and intending to conduct a rigorous review of the company's compliance procedures in China.

In April 2014, the Wall Street Journal reported that GSK terminated employees in China following increased monitoring of employees amidst bribery probes, but it is not known how many employees have been let go. GSK previously said that it employed about 7,000 people in China. GSK confirmed that it fired staff in China for bribing officials in 2001 in a case that predates the wider allegations of corruption. About 30 staff in GSK's vaccines business were dismissed for bribing Chinese officials after they were found to be involved in bribing Chinese officials and taking kickbacks, according to Reuters.

In addition, GSK is conducting an internal investigation into the alleged bribery in Poland, the United Arab Emirates, Lebanon, Jordan, Syria, Iraq and Romania.

Agencies: Poland: Central Anticorruption Bureau

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

Poland's Central Anti-Corruption Bureau ("CAB") opened a criminal investigation into GSK and announced on 14 April 2014 that 13 people had been charged in connection with the investigation.

Agencies: United Kingdom: Serious Fraud Office

Results:

Year Resolved: 2019

Compliance Monitor:

Ongoing: No

Details:

According to the media reports, GSK met with the Serious Fraud Office ("SFO") regarding the allegations in China on 21 July 2013.  

On 27 May 2014, GSK disclosed that the UK's Serious Fraud Office opened a formal criminal investigation of the company's commercial practices. GSK has stated that it has responded to the investigation.

In March 2017, the SFO director David Green has stated that he would like to resolve the GSK investigation by the time he leaves the SFO in April 2018.

08 February 2018: GSK advised that the SFO has requested additional information about third party advisers GSK hired in China during the course of corruption investigations into the company.

22 February 2019, the SFO announced to close the investigation into GlaxoSmithKline PLC based on evidence gathered and public interests.

Agencies: United States: Department of Justice

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

On 30 September 2016, the DOJ reportedly told the FCPA Blog via email statement that they have concluded their investigation and will be taking no further action.

08 February 2018: GSK advised in a securities filing that the DOJ had asked for more information about third-party advisers that GSK had hired in China during a corruption investigation there. The DOJ's request was spurred by GSK's notification of the UK SFO's requests for additional information about the third-party advisers. 

Agencies: United States: Securities and Exchange Commission

Results: Cease-and-Desist Order, Civil Penalty

Year Resolved: 2016

Compliance Monitor: N/A

Ongoing: No

Details:

On 30 September 2016, GSK, without admitting or denying the SEC's findings, entered into cease-and-desist order to settle the charges that GSK violated the internal controls and books and records provisions of the FCPA. As part of the settlement, GSK agreed to pay a civil money penalty in the amount of USD 20,000,000 to the SEC. In addition, GSK agreed to provide report of the status of GSK's remediation and implementation of compliance measures to the SEC for a period of two years at no less than nine-month intervals.

The SEC noted its consideration of GSK's prompt remedial actions and full cooperation provided to the SEC in coming to the settlement.

Agencies: United States: Securities and Exchange Commission

Results:

Year Resolved:

Compliance Monitor:

Ongoing: Yes

Details:

08 February 2018: GSK advised in a securities filing that the SEC had asked for more information about third-party advisers that GSK had hired in China during a corruption investigation there. The SEC's request was spurred by GSK's notification of the UK SFO's requests for additional information about the third-party advisers. 

ENTITIES / INDIVIDUALS INVOLVED
  • GlaxoSmithKline plc ("GSK")
  • GlaxoSmithKline (China) Investment Co Ltd (“GSKCI”)
  • Sino-American Tianjin Smith Kline & French Laboratories Ltd (“TSKF”) 
  • Tianjin Zhong Xin Pharmaceutical Group Corporation Ltd
  • Tianjin Pharmaceutical Group Co Ltd.
  • Shanghai Linjiang International Travel Agency (alleged intermediary of GSK in China)
  • Mark Reilly (head of GSK's China operations)
  • Xi'an China Travel Service Co.
  • Maatouk Group, Syrian distributor
  • Huang Hong
  • Liang Hong 
  • Zhang Guowei 
  • Zhao Hongyan 
Details Of How Conduct Was Discovered

Discovery Method: Whistleblower

Details:

A person familiar with GSK's Mideast operations emailed the company and threatened to disclose to the DOJ and SEC.

Country: Iraq

Discovery Method: Whistleblower

Details:

The whistleblower who disclosed bribe allegations in Syria said the information would be passed on to the DOJ and SEC.

Country: Syria

Discovery Method: Whistleblower

Details:

Whistleblower e-mail.

Country: Romania

Discovery Method: Whistleblower

Details:

In January 2013, an anonymous 5,200-word email describing a systemic fraud and bribery scheme at GSK was received by the GSK board. Over the next 17 months, the whistleblower sent nearly two dozen emails to Chinese authorities, GSK executives and auditor, PricewaterhouseCoopers ("PwC").

Despite the emails, GSK dismissed the whistleblower allegations as a "smear campaign" and neither properly investigated the allegations, improve its internal controls nor change its marketing practices.

Country: China

Discovery Method: Whistleblower

Details:

Whistleblower e-mails.

Country: Jordan

Discovery Method: Whistleblower

Details:

Whistleblower e-mails.

Country: Lebanon

Discovery Method: Unspecified

Details:

Country: Poland

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