Glaxo Telling Muddled Stories on Chinese Bribery Scandal
July 26th, 2013 // 1:24 pm @ jmpickett
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For the last month, GlaxoSmithKline officials have tried to look contrite and diligent as they try to control the damage from the massive bribery scandal in China. There, four senior employees were detained by authorities for allegedly participating in a scheme that involved paying hundreds of millions of dollars in bribes. There also were allegedly sexual favors doled out by a travel company to employees at Glaxo, related to the bribery activity.
Glaxo has admitted to authorities in China that employees broke laws and the president of international operations admitted the same thing, saying that employees acted outside of Glaxo controls and processes. CEO Andrew Witty said the same thing on a conference call this week with the media and analysts.
But some have noted a large inconsistency. Until these latest admissions, Glaxo insisted that its internal probe into allegations of bribery had not found any signs of illegal activity. The drugmaker restated this in the days before the bombshell charge from Chinese authorities that GSK is similar to a crime boss in China.
But the emails that a tipster sent to execs at Glaxo, which went through the PR department, indicate that the infractions were investigated internally by GSK and by authorities in China. But in comments to the Wall Street Journal, Witty has stated that the probes were about different issues.
The allegations, he told the Journal, were about two sets of issues. The first set that was raised by an anonymous tipster were fully investigated but the firm could not find any evidence of abuse of the system. Allegations made by Chinese authorities are different, Witty said.
Witty does not detail how these allegations are different, but the paper makes a comparison between the email charges with what the authorities in China discussed. There turns out there are a lot of similarities. This suggests that Witty is muddying the waters about some details, or that GSK officials might have thought that Chinese authorities would not be as aggressive as they have been.
For example, the tipster wrote GSK that sales agents were bribing doctors with fees for speaking, cash and paid trips to prescribe certain drugs. Travel agencies were in on this too. The sales people decided who the top decision makers are at certain hospitals and they invite those doctors to attend conferences abroad.
After the doctor accepts, GSK sets up a new account at the travel agency for that doctor. The travel agency pays for the hotel room, plane ticks and gives them cash. The travel agency would then invoice GSK for everything.
This sounds like what authorities in China said happened two times this month. That is when they disclosed that they were looking into payments that occurred between travel agencies and GSK that were possibly part of a plot to provide bribes to government officials and doctors.
Another possible example is GSK VP Liang Hong. He was mentioned in some emails as taking physicians on sightseeing trips in Israel, rather than going to a conference that was set up by GSK for doctors. Hong is one of the executives that has been detained by Chinese officials.
Why is Witty insisting that the two proves are different? Might there be something that GSK execs or officials in China did not disclose yet? Until GSK can explain how the two probes are different, its credibility is only going to be further damaged. It even could end up putting the Corporate Integrity Agreement it signed in 2012 in jeopardy.
