China security ministry says GSK executives confess to economic crimes

BEIJING (Reuters) - Executives of GlaxoSmithKline Plc in China have confessed to charges of bribery and tax law violations, the country's security ministry said, in one of the most prominent graft cases involving a foreign company in three years.

Bribes were offered to Chinese government officials, medical associations, hospitals and doctors to boost sales and prices, the ministry said in a statement on its website on Thursday. GSK executives also used fake receipts in unspecified tax law violations, it added.

The statement did not give details on the number of GSK executives questioned, their identities or when the questioning took place. In response to the ministry's charges, GSK said it is willing to cooperate with the authorities.

China in recent months has targeted foreign firms on multiple fronts including alleged price-fixing, quality controls and consumer rights, forcing companies to defend their reputations in a country where international brands often have a valuable edge over local competitors in terms of public trust.

The charges of bribery make the GSK case the highest profile probe in China since four executives of mining giant Rio Tinto Plc were jailed in March 2010 for taking bribes and stealing commercial secrets.

The four - one a China-born Australian citizen and three Chinese nationals - received jail terms of between seven and 14 years after being found guilty of getting information from confidential strategy meetings of the body representing China's steel industry in negotiations with iron ore suppliers.

Under China's legal system, the GSK executives will be formally charged after the completion of the preliminary investigations.

"We take all allegations of bribery and corruption seriously," GSK said in its statement.

"We continuously monitor our businesses to ensure they meet our strict compliance procedures - we have done this in China and found no evidence of bribery or corruption of doctors or government officials."

The company declined to comment on the number or nationality of staff involved.

It is too early in the process to know the extent of potential punishments, said Jerry Ling, a Shanghai-based partner for law firm Jones Day who specializes in U.S. and Chinese anti-bribery law.

But the GSK case could be serious, Ling said.

"The Administration for Industry and Commerce deals with your run-of-the-mill bribery. It could lead to fines and being put on a black list, but rarely results in criminal sentences," he said.

"The fact that the Ministry of Public Security is running this investigation means that the exposure is more serious."

GSK has also run into other problems in China.

It said on Monday it was investigating separate allegations that its staff had used improper tactics to market the cosmetic treatment Botox in China, but had so far found no evidence of bribery or corruption.

GSK, Merck & Co Inc and other foreign and domestic drugmakers are also being investigated by China's top economic planning agency on cost and pricing issues.

China is an increasingly important market for international pharmaceutical companies, which are relying on growth in emerging markets to offset slower sales in Western markets where many former blockbuster drugs have lost patent protection.

(Reporting by Michael Martina in BEIJING, Kazunori Takada in SHANGHAI and Paul Sandle in LONDON; Writing by Jonathan Standing; Editing by Stephen Coates and Ryan Woo)

Source: http://news.yahoo.com/china-security-ministry-says-gsk-execs-confess-crimes-061601706.html

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