GlaxoSmithKline: the plot thickens

As a sex video smears the pharmaceutical giant's China boss, Jim Armitage reports on how its private investigator voiced concerns about new secrecy rules weeks before his arrest

As covertly-filmed sex tapes go, the one that sent the GlaxoSmithKline Chinese bribery story back into the stratosphere had a pretty tame subject matter.

A graphic video of a 52-year-old businessman – GSK's then-China chief Mark Reilly – in a two-in-a-bed romp with, er, his girlfriend, was never going to set the tabloids on fire. But it detonated a bizarre series of events that culminated in the monogamist's arrest and the biggest corruption scandal to hit China for years.

The bizarreness factor is truly something else. As reports at the weekend revealed, the sex tape was sent to Mr Reilly's chief executive in London, Andrew Witty, and other senior executives last March in what appears to be some kind of smear or blackmail attempt – despite the fact that Mr Reilly was separated from his wife at the time.

However, it was not the first attack: Glaxo executives had already received detailed allegations of bribery and corruption in China from an anonymous emailer in January.

Mr Reilly was authorised to hire a private detective to investigate. He hired Peter Humphrey, one of the most highly regarded investigators in the country, to find who the leaker might be. Perhaps curiously, despite hiring at some expense a man seen as highly trustworthy in his field, GSK did not reveal to Mr Humphrey anything of the serious allegations until two months after his investigation into the origin of the sex tapes started. He was, GSK sources said, instructed solely to investigate the source of the sex tape emails.

According to fellow investigators who spoke to The Independent, Mr Humphrey is a long-term veteran of Chinese corporate investigations.

One who worked with him on a previous investigation says: "He's the best. He was always a very careful guy, extremely cautious about staying on the right side of the law. He made it very clear all the way that he could not do anything that overstepped the mark and took great pains to make that clear to clients."

Friends described him as "more of a diplomat than a James Bond type", adding: "He just really knows the ground out there: who the top people are, how to access officials, how to have conversations with officials without putting their backs up."

The trouble is that performing due diligence on companies and people in China is full of grey areas.

Mr Humphrey himself described the problem last year in an article about how changes to Chinese laws were making it harder to investigate fraud. He wrote about a "sudden government action to suppress certain data" such as company accounts, shareholder registers and information on directors which are used every day by forensic accountants.

The article highlighted how the new rules came after investigations by the Bloomberg news agency, using forensic accounting techniques on public documents, revealed unsavoury details about Chinese Politburo member Bo Xilai and his wife and then the family of President-to-be Xi Jinping. These were investigations, Mr Humphrey wrote, that "were making China's ruling elite wobble". The clampdown also followed a series of powerful attacks on prestigious Chinese companies listed on the US Nasdaq stock market.

In light of the new restrictions on access to company filings, fraud investigators had to resort more than ever to "human source" inquiries – interviews with people, in other words.

It is a widely-held view in the due diligence community, as Jonathan Russell, senior associate at business intelligence company Alaco says: "China's attitude to corporate governance and the public disclosure of corporate and legal data can be seen as schizophrenic. They're not making it easy to get hold of what would generally be considered standard public documents such as corporate records. However, the crackdown on bribery and corruption should be welcomed."

A few weeks after Mr Humphrey's article appeared, he and his wife were arrested for illegally buying and selling private information – perhaps precisely the kind of information that now occupies that grey area between legal and illegal. Five days later, GSK was accused of funnelling up to 3bn yuan through travel agencies to bribe doctors and officials in China.

Today, it emerged that Mr Humphrey's report for GSK did not reach a conclusion on who was behind the sex tape or the "whistleblowing" allegations. He and his American wife Yu Yingzeng are expected to go on trial late next month.

Why did GSK not tell its investigator to look into the allegations of wrongdoing, allegations which, it is claimed, he immediately said were "totally credible" when he saw them? GSK says it had already investigated them internally and with external legal experts and ascertained that there was no substance to them. All they discovered was some evidence of staff padding out their expenses on travel allowances and the like.

Which begs the question: how come the Chinese investigators found enough evidence to lay proposed criminal charges on Mr Reilly and others that the firm made billions of yuan from elaborate schemes to bribe doctors while Glaxo found nothing? Mr Reilly, currently in Shanghai but not in detention, could face decades in jail.

Glaxo sources respond that some of the whistleblower allegations, such as claims that it used bribery to push more sales of Botox in the country, do not appear on the police's proposed charge sheet. They also argue that Glaxo's investigators did not have the same investigatory powers as the Chinese police. Sources at the drug giant also point out that it took the police nearly a year to get to the situation where, in May, they finally lodged proposed charges.

In the meantime, Glaxo a year ago retained the services of another law firm, Ropes & Gray, which is carrying out its own investigation into the allegations. This investigation is still ongoing. Their lawyers must tread carefully in their probing. Otherwise they, too, might end up facing trials like Mr Humphrey and his wife.

Start your day with The Independent, sign up for daily news emails
Voices
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
PROMOTED VIDEO
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
News
ebooksNow available in paperback
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Voices
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum