Home' Trinidad and Tobago Guardian : September 21st 2014 Contents A44
Sunday Guardian www.guardian.co.tt September 21, 2014
China fined GlaxoSmithKline Plc
(GSK) a record three billion yuan
(US$489 million) on Friday for pay-
ing bribes to doctors to use its
drugs, underlining the risks of
doing business there while also
ending a damaging chapter for the
A court in the southern city of
Changsha handed suspended jail
sentences to Mark Reilly, the former
head of GSK in China, and four other
GSK executives of between two and
four years, according to state news
Briton Reilly, shown on state tel-
evision wearing a suit and looking
tired during the trial, will be deport-
ed, a source with direct knowledge
of the case said.
The verdict, handed out behind
closed doors in a single-day trial,
highlights how Chinese regulators
are increasingly cracking down on
However, it also offers GSK a
potential way forward in the fast-
growing Chinese pharmaceutical
market, a magnet for foreign firms
who are attracted by a healthcare
bill that McKinsey & Co estimates
will hit US$1 trillion by 2020.
"If GSK China can learn a pro-
found lesson and carry out its busi-
ness according to the rule of law,
then it can once again win the trust
of China s government and people,"
Xinhua said in a commentary. Xin-
hua closely reflects China s official
The fine, equivalent to around
four per cent of GSK s 2013 operating
profits, was less than some investors
had feared. GSK will take a charge
in the third quarter and pay the
penalty from existing cash resources.
"GSK Plc has reflected deeply and
learned from its mistakes, has taken
steps to comprehensively rectify the
issues identified at the operations
of GSKCI, and must work hard to
regain the trust of the Chinese peo-
ple," GSK said in a written apolo-
gy.Future commitments include
investment in Chinese science and
improved access to medicines across
the country through greater expan-
sion of production and flexible pric-
ing, it said.
UK, US also probing GSK
GSK also faces investigations into
its overseas practices by US and
British authorities. Those investiga-
tions continue and could result in
further penalties for the group.
"The SFO criminal investigation
into the commercial practices of
GlaxoSmithKline Plc and its sub-
sidiaries continues," a spokeswoman
at Britain s Serious Fraud Office said
in an e-mail.
In the US, GSK is being investi-
gated under the Foreign Corrupt
Practices Act, which prohibits bribery
of public officials.
In addition to the high-profile
Chinese case, GSK has been accused
of corrupt practices, on a smaller
scale, in Poland, Syria, Iraq, Jordan
GSK said the activities by the
firm s China unit were a "clear
breach" of GSK s governance and
Chinese police first accused GSK
of bribery in July last year when it
said that the firm had funneled up
to three billion yuan, exactly the
same amount as the fine, to travel
agencies to facilitate bribes to doc-
tors and officials.
"Reaching a conclusion in the
investigation of our Chinese business
is important, but this has been a
deeply disappointing matter for GSK.
We have and will continue to learn
from this," GSK CEO, Andrew Witty,
said in a statement.
Biggest corruption scandal
The case is the biggest corruption
scandal to hit a foreign company in
China since the Rio Tinto affair in
2009, which resulted in four execu-
tives, including an Australian, being
jailed for between seven and 14 years.
The judgment on Friday took many
people by surprise, partly because
Chinese authorities did not make the
date of the trial public in advance.
The ruling from the Changsha
Intermediate People s Court means
China has charged GSK s China unit
with bribery as well as the individual
executives. Apart from Reilly, the other
four---Zhang Guowei, Liang Hong,
Zhao Hongyan and Huang Hong---
are Chinese former company offi-
Under Chinese criminal law, bribery
by a corporate unit can lead to a large
fine and jail sentence for the unit s
head. Reilly s China-based lawyer
declined to comment on Friday.
A spokesman for the British Con-
sulate General in Shanghai said that
Britain had "continually called for a
just conclusion to this case," but
declined to comment further while
the case was open for appeal.
China fines GSK record US$489m for bribes
Plc fined US$489
million for paying
bribes to doctors
to use its drugs.
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