China accuses Glaxo of criminal behaviour

Earlier this year, authorities in China began looking into suspicious activity involving a Shanghai travel agency that was rumoured to have huge revenue but few bookings.

What they uncovered, they said on Monday, was a conspiracy worth tens of millions of dollars and directed by senior executives at the British drug firm GlaxoSmithKline.

Investigators said, for years, executives at the company joined with travel agencies and consulting firms in China to funnel bribes to doctors, hospitals, medical associations, foundations and government officials.

The pay-offs helped bolster drug sales and allowed GlaxoSmithKline to sell its products for higher prices in China.

At a news conference in Beijing, authorities accused senior executives at GSK of organising fake conferences, over-billing for training sessions and accepting kickbacks in the form of cash and luxury travel.

In some cases, authorities said, travel companies eager to sign long-term deals with GSK hired young women to engage in what officials called "sexual bribery" with managers at the drugmaker.

"It's like a criminal organisation - there's always a boss," said Gao Feng, from the Chinese Ministry of Public Security. "And in this case, GSK is the boss."

A few days ago, police said GSK managers had confessed to engaging in bribery and tax fraud.

On Monday, the government said four senior executives at GSK were being detained, including the head of the drugmaker's legal department, two vice-presidents and the head of business development in China. The four were all Chinese nationals, police said.

Mark Reilly, the head of GSK's operations in China and a British national, recently left the country after investigators raided the company's offices, police said.

On Monday, GSK issued a statement. "We are deeply concerned and disappointed by these serious allegations of fraudulent behaviour and ethical misconduct by certain individuals at the company and third-party agencies. Such behaviour would be a clear breach of GSK's systems, governance procedures, values and standards. GSK has zero tolerance for any behaviour of this nature."

Authorities said the investigation was continuing and that the case involved scores of travel agencies and other multinational corporations that may have also fabricated travel bookings.