GlaxoSmithKline boss Sir Andrew Witty:: UK headquarters 'knew nothing' of China fraud

Scandal has seen a number of executives detained

The head of drugs giant GlaxoSmithKline has sought to blame a handful of senior managers for corruption allegations it is facing in China and said the company itself had been a victim of their actions.

Sir Andrew Witty said bosses at the multinational pharmaceuticals company's London headquarters knew nothing of the millions of pounds in bribes allegedly being paid to doctors and health officials to boost sales and raise prices.

The GSK chief executive said he was willing to travel to the country to address the multimillion-pound bribery allegations, which he described as "shameful", though other top executives were handling the company's response there.

He brushed off questions about whether he would accept any bonus this year in the light of the claims, saying it was too early to say what the consequences of the investigation would be, and maintained the company's control and audit systems were "extremely robust".

"Just as we see in all large organisations, unfortunately there is a risk that individuals can sometimes do inappropriate things," Sir Andrew told reporters during a conference call as GSK published second quarter results.

"I remain strongly of the view that 99.99% of the people in this organisation are absolutely operating in the appropriate way and understand not just the rules but the values the company stands by."

He added: "As far as headquarters, we had no sense of this issue.

"This seems to have been a number of senior managers all acting outside our processes."

The chief executive admitted that the scandal would have an impact on the company's performance in China.

It is claimed that senior managers at GSK funnelled money through travel agencies for "conference services", with cash then kicked back to the managers and some of it used for bribes.

Sir Andrew said: "It appears that certain senior executives in the China business have acted outside our processes and controls to both defraud the company and the Chinese health care system.

"To see these allegations about people working for GSK is shameful.

"For me personally they are deeply disappointing."

He said the company was determined to fight corruption and had begun an independent review to establish what happened.

The scandal has seen a number of executives detained and Steve Nechelput, the company's finance director in the country, banned from leaving - though he has not been held or questioned himself.

Sir Andrew said he was "absolutely willing and ready to go to China when it is the right moment" but expressed confidence in the "strong senior management" dealing with the allegations.

He admitted that the company had also been in contact with authorities in the UK and the US amid speculation that GSK could face criminal action under their laws as well as from the Chinese inquiry.

"We have reached out to various regulators on both sides of the Atlantic to open up channels with them," Sir Andrew said.

"We have consulted with the UK Government and they have been helpful, through the Foreign Office, in giving us advice."

Sir Andrew was speaking as the company announced second quarter turnover to the end of June at £6.6 billion, up 2%, though pre-tax profits were down 16% to £1.3 billion from the same period last year.

He said the period had seen encouraging progress in the late stage medicines pipeline with US approvals for three new drugs.

Pharmaceuticals and vaccine turnover in the US was up 5% but flat in Europe, blamed on austerity measures and the use of generic drugs as alternatives to some older products.

Sir Andrew said in a preface to today's results that it was looking for sales to grow broadly across its emerging markets.

He added: "Clearly, we are likely to see some impact to our performance in China as a result of our current investigation, but it is too early to quantify the extent of this."

Today's report also made reference to "alleged serious economic crimes by GSK China's pharmaceutical operations" in its section on legal matters.

It said: "It is not possible at this time to make a reliable estimate of the financial effect, if any, that could result from this matter."

Meanwhile, Sir Andrew said plans to sell drinks brands Lucozade and Ribena remained on track and agreement was expected to be reached by the end of the year.

PA

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