Corruption Charges Against GSK Seen as Warning

19.05.2014 -

Corruption charges against representatives of UK drugmaker GlaxoSmithKline (GSK) in China are a warning to other foreign firms and could do irreparable damage to the company's Chinese operations, the official Xinhua news agency said.

Chinese police charged GSK's legal representative in China, Mark Reilly, and two others with corruption after a 10-month probe found that the firm made billions of yuan from bribing doctors and hospitals.

Healthcare is a highly sensitive area in China and has become a focal point for President Xi Jinping's attack on corporate graft, with a number of global and Chinese drugmakers coming under the spotlight for corruption.

"GSK's practices eroded its corporate integrity and could cause irreparable damage to the company in China and elsewhere. The case is a warning to other multinationals in China that ethics matter," Xinhua said in an English-language editorial.

So far, the UK's biggest pharmaceutical producer has not been charged with any crime, but lawyers said that by charging its legal representative in the country, authorities were leaving the door open for a charge against the company.

Any bribery charges against GSK could mean the cancellation of its business licenses, crippling its operations in a major growth market for Western pharmaceutical giants.

The company could also incur huge fines, while Reilly himself faces decades in jail if the charges are upheld as expected.

The corruption charges are believed to be the most serious against a major multinational firm and a senior expatriate executive in China's history, and are a wake-up call for other foreign firms in the country.

Foreign firms in China are said to be firming up compliance efforts in the wake of the GSK investigation.

The last major corruption scandal to hit a foreign company in China involved miner Rio Tinto in 2009, which resulted in four executives, including a Chinese-born Australian, being jailed for seven to 14 years.