China is a key growth market for large drugmakers, which are counting on its swelling middle class to offset declining sales in Western countries. China is set to be the second biggest pharmaceuticals market behind the United States within three years, according to consultants IMS Health.
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 executives, including an Australian, being jailed for between seven and 14 years.
BEIJING/SHANGHAI, May 14 (Reuters) Chinese police on Wednesday said they had charged the former British boss of drugmaker GlaxoSmithKline PLC's China business and other colleagues with corruption, after a probe found the firm made billions of yuan from Nike Air Max 95 Halloween
By Megha Rajagopalan and Kazunori Takada
The charges against the British executive shocked the business community as GSK had previously said it believed the alleged corruption involved senior Chinese staff only.
had forged accounts, faked transactions to inflate revenue, pressed sales staff to engage in bribery and tried to cover its tracks.
Chinese officials on Wednesday made no mention of possible sanctions against GSK itself, although Xinhua said the firm Grey Air Max Outfit
"We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK," the drugmaker said in a brief statement issued in London, its headquarters.
Reilly and the executives were charged with corporate bribery, bribing non government officials and bribing business units.
GSK is Britain's biggest drugmaker.
Shares of London listed GSK were trading down one percent, underperforming a 0.2 percent drop in the broader FTSE 100 index .
The allegations against GSK have damaged its reputation, thrown its China management team into turmoil and forced Air Max 95 On Women it to change its China business model, although the firm says head office had no knowledge of alleged wrongdoing.
and Bayer AG were also visited by Chinese officials in 2013 as part of a broad investigation into the business.
GSK has said that some of its senior Chinese executives appeared to have broken the law. It has also said it has zero tolerance for bribery, calling the allegations in China "shameful".
GSK's revenue in China leapt to 6.9 billion yuan ($1.11 billion) in 2012 from 3.9 billion yuan in 2009, the first year that Reilly headed operations, Xinhua said.
Reilly briefly left China when the scandal broke in July last year but voluntarily returned to cooperate with police. Attempts to reach him on Wednesday were unsuccessful. He was replaced as GSK's China head on July 25 last year, 10 days after the initial Chinese police accusations.
"Later they could bring an action against the company and seek penalties against the company and I wouldn't be surprised if they did that actually, because the claim is so egregious that the company could be charged and fined," said Steven Dickinson, Qingdao based partner with law firm Harris Moure.
"We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens."
"But the thing is you can't put a company in jail and they want someone in jail. They want Mr. Reilly in jail for about 10 years. That's what they're looking to do," he added.
Chinese police charge British former head of GSK in China with bribery
Mark Reilly and two Chinese executives, Zhang Guowei and Zhao Hongyan, were also suspected of bribing officials in the industry and commerce departments of Beijing and Shanghai, the official Xinhua news agency reported, quoting police in Hunan province.
Kenneth Jarrett, president of the American Chamber of Commerce Shanghai, said he was surprised at the "strong response" from the police.
A spokesman for the British consulate in Shanghai said officials were in regular contact with Reilly and were providing consular assistance. The spokesman declined to comment on Reilly's whereabouts.
"I don't think that anyone had been lulled back into complacency, but if anybody had this will wake them up," Jarrett added. The GSK scandal had spurred many foreign corporations in China to increase vigilance against bribery.
Officials gave no specific details on the amount of bribes paid or exactly how much the company had illegally earned, although they had previously accused the firm of funneling up to 3 billion yuan ($482 million) to travel agencies to facilitate bribes to doctors and officials.
The charges which carry a maximum sentence of life in prison in the case of bribery were seen as harsher than many industry insiders and China based foreign executives had expected.
"(GSK) departments offered bribes to hospitals and doctors as well as personnel to boost their sales. The money involved was in the billions of yuan," a Ministry of Public Security official told a press conference in Beijing.
elaborate schemes to bribe doctors and hospitals.
Other large international drugs manufacturers including Novartis AG, AstraZeneca Plc, Sanofi SA , Eli Lilly Co Air Max 95 Silver
But bribery between sales staff and doctors is rife in the world's second biggest economy, and it remains to be seen whether the GSK case will be a one off or the first of a broader campaign to clean up the Chinese health sector.
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