GlaxoSmithKline CEO says HQ, British execs 'knew nothing' of China fraud

GSK CEO Andrew Witty

GlaxoSmithKline ($GSK) CEO Andrew Witty faced a flurry of questions about China when he stood up to talk about second-quarter earnings--and he bowed out of the conference call before answering many of them. But he made a few proclamations that distanced the home office from the high-profile corruption scandal. In fact, he blamed the locals.

The probe "appears to be focused on a number of senior managers, potentially defrauding GSK and doing something inappropriate and illegal," Witty said during the call (as quoted by The Guardian). That doesn't include the Brits, however, he said. There are no signs that GSK China's British management played a role in the scandal, or even knew about the financial sleight-of-hand their colleagues were allegedly engaged in, he added.

As for company headquarters, the top brass in the U.K. "knew nothing" of the potential fraud in China, he said. The internal investigation GSK cited as the corruption allegations emerged--the one that found no evidence of the sins claimed by a company whistleblower--was "quite different" to the current probe, he said.

To recap, Chinese authorities have detained four senior Glaxo managers, all Chinese nationals, in connection with allegations of tax fraud and corruption. One of them confessed on state television, and brought potential sex crimes into the mix. GSK China's top manager, Mark Reilly, a U.K. citizen, had traveled back to headquarters as the probe heated up, while the unit's finance chief, Steve Nechelput, is now confined to China as the investigation continues.

Over the weekend, Witty dispatched his emerging markets chief, Abbas Hussain, to China to troubleshoot the crisis. Hussain has already apologized to Chinese officials and promised lower prices for Glaxo products going forward. Today, Witty said he is "absolutely willing and ready" to go to China to address the problems himself, but he's busy with other issues at home.

Witty has spent his time as CEO pledging to reform Glaxo, making it into a kinder, gentler, more honest organization. As the company negotiated to settle longstanding U.S. government probes of shoddy manufacturing, cover-ups and off-label marketing--finally agreeing to pay several billion dollars in penalties--Witty overhauled the pay structure for sales reps, limited payments to doctors, cut prices in poor countries, and set up a system to open up clinical trial data for further study, among other things. He won a knighthood for those efforts last year.

But as if his transformation to Sir Andrew Witty were a jinx, he's been forced to apologize for the company's bad behavior over and over, repeatedly promising that GSK really is behaving more honorably. This time was no different. "I am personally very disappointed. They are shameful allegations," Witty said today. "I remain strongly of the view that 99.9% of individuals in this organization are operating in the right way."

- read the Guardian post

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