Former GlaxoSmithKline executive accused of running bribery network in China

An executive at the British drugs company GlaxoSmithKline has been accused of running a “massive bribery network” in China in which hospital staff were paid to use the firm’s medical products and boost sales.

Mark Reilly has been charged with bribery and fraud for allegedly instructing his subordinates to pay off health officials, forcing up drug prices and generating illegal sales for Glaxo worth more than £89 million.

Police claim secret payments were made to doctors, hospital staff and government officials. The scale of the charges, following a 10-month investigation, will come as a blow to David Cameron who lobbied on behalf of Glaxo when he visited China in December.

The Prime Minister mounted a staunch defence of the company’s record, saying at the time: “They are a very important, very decent and strong British business that is a long-term investor in China.”

Mr Reilly stepped down as head of China for Glaxo last July and briefly left the country but returned there late last year. It is not clear if he has been detained since, but British embassy officials said they were in regular contact with him.

Two Chinese executives, Zhang Guowei and Zhao Hongyan, were also accused of bribing officials in the industry and commerce departments of Beijing and Shanghai, the official Xinhua news agency reported, quoting police in Hunan province.

At a news conference in Beijing, police said the cost of the drugs sold by GSK in China was far higher than that of similar drugs sold by the company in other countries.

“The more drugs they sold, the more bribes they gave,” said Gao Feng, head of the economic crimes investigations unit at the Public Security Ministry. “The more bribes they gave, the higher the drug price was. GlaxoSmithKline’s behaviour demonstrates a complete chain of bribery.”

Police added that the company’s headquarters had been “very responsible” and had given them its “full support”, but claimed that its Chinese operation had tried to organise another round of bribes to obstruct their investigation.

The charges – which carry a maximum sentence of life in prison in the case of bribery – were seen as harsher than many industry insiders and China-based foreign executives had expected.

Glaxo said it had seen an official at the Chinese Ministry of Public Security yesterday. A spokesman said: “We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GlaxoSmithKline. We will continue to fully co-operate with the authorities in this matter.

“We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens.”

Chinese officials said 46 people were implicated in the case which was launched last June.

Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, said he was surprised at the “strong response” from the police.

“I would agree that it’s not what I would have expected because it seemed like Glaxo were co-operating very closely with the authorities,” he said. “I don’t think that anyone had been lulled back into complacency, but if anybody had this will wake them up.”

Under Mr Reilly, Glaxo’s revenues in China have soared from 3.9 billion yuan in 2009 to 6.9 billion, according to Xinhua.

Glaxo’s could face prosecution in both the UK under the Bribery Act and the US under the Foreign Corrupt Practices Act if the allegations are proved. It is illegal for companies based in either country to bribe government employees abroad.

The case is the biggest bribery affair involving a foreign company in China since Rio Tinto saw four executives, including an Australian, jailed for between seven and 15 years in 2009.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat