GlaxoSmithKline’s legal situation in China appears to be worsening as that country’s official news agency reports that four “senior executives” are in custody as part of a bribery investigation.

The Financial Times in London’s headline on the latest update says Chines officials believe GSK (NYSE: GSK) is a ‘ringleader’ in an effort to boost drug prices.

“We found that bribery is a core part of the activities of the company,” said Gao Feng, head of the economic crimes investigation unit at the Ministry of Public Security. “To boost their prices and sales, the company performed illegal actions.”

“[J]ust like criminal organisations always have a ringleader, in this criminal scheme GSK is the ringleader,” the Financial Times noted.

In a statement issued Monday morning, GSK said it has taken steps to deal with the situation.

“We are deeply concerned and disappointed by these serious allegations of fraudulent behavior and ethical misconduct by certain individuals at the company and third-party agencies,” Glaxo said in emailed statement. “Such behavior would be a clear breach of GSK’s systems, governance procedures, values and standards. GSK has zero tolerance for any behavior of this nature.”

GSK has said in the past that its own investigation has found no evidence of bribery. The company said last week it would cooperate with the authorities.

“If evidence of such activity is provided we would of course act swiftly on it,” GSK said.

News service Xinhua says the executives are being held “on suspicion of having committed serious economic crimes.”

The four were identified by Xinhua as:

  • Liang Hong, vice president and operation manager of GSK (China) Investment Co.
  • Vice president and human resource director Zhang Guowei
  • Legal affairs director Zhao Hongyan
  • Business development manager Huang Hong

At a news conference, officials said GSK used more than 700 travel agencies to provide bribes to local officials and doctors, Reuters reported.

Gao Feng, head of the economic crimes investigation unit at the Ministry of Public Security, identified the executives.

Gao also said some $489 million was transferred to the agencies, but he did not specify how much was allegedly spent on bribes.

The news conference was the first time Chinese authorities provided details about the investigation. 

“We have sufficient reason to suspect that these transfers were conducted illegally,” Gao said, according to Reuters.

“You could say the travel agencies and GSK were criminal partners. Among the partners, GSK was mainly responsible. In a criminal organization there is always a leader.”

GSK officials offered no comment, Reuters noted. 

“Some travel agencies had reportedly offered ‘sex bribes’ to GSK senior executives to maintain business contact with the companies,” Xinhua reported.

GSK operates its North American headquarters in RTP. 

The drug giant is headquartered in Britain but has a presence in the United States, which could make it liable to penalties under U.S. anti-bribery laws.

Last week, state media reported the government was investigating production costs for 60 foreign and domestic drug companies in a possible first step toward changing state-set maximum prices. The announcement gave no indication any companies were suspected of wrongdoing.

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