New scrutiny for GlaxoSmithKline after news of 2001 bribery-related housecleaning in China

Paul Carter

GlaxoSmithKline's ($GSK) bribery woes in China apparently go back a bit further than the $489 million scandal that broke last summer. The U.K. company has acknowledged that it fired about 30 staffers in its China vaccines business in 2001 after turning up evidence of corruption.

According to the Financial Times, Glaxo had learned that employees might be bribing Chinese officials and taking kickbacks. At the time, then-China head Paul Carter brought in PricewaterhouseCoopers to investigate. Among his worries was the fact that Chinese officials had detained two employees without his knowledge.

The PwC team--including Peter Humphrey, now an independent investigator facing Chinese charges in connection with GSK's current episode--confirmed Glaxo's suspicions. So, Carter fired the company's head of vaccine sales in China.

Glaxo now says it handled that situation appropriately. "These matters occurred over 12 years ago," the company told the FT. "We believe appropriate investigation and action was taken at the time."

But the U.S. Department of Justice plans to take its own look at the 2001 probe, a DoJ source told the newspaper. Already investigating current whistleblower allegations against the company, the agency may take a tougher stance if it finds a pattern of corrupt behavior, legal experts say.

"It is something that a prosecutor would have to take into account," Morrison & Foerster partner Timothy Blakely told the Times.

Just as it did with last year's findings, the British drugmaker claims its higher-ups--including CEO Andrew Witty, who was the company's head of Asia-Pacific at the time--had no knowledge of the 2001 case. Witty has been working hard to clean up the company's marketing practices and its tarnished reputation, introducing a slate of reforms that include striking doctor speaking fees and quota-based sales targets.

But that job has grown more and more complicated as additional bribery charges have emerged. GSK is now probing corruption allegations in China, Iraq, Poland, Jordan and Lebanon, and it's eyeing potential violations in a handful of other Middle Eastern countries, too.

- read the FT story (reg. req.)

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