GSK China Fraud - Tip of the Iceberg

ChinApocalypse has begun

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Looks like nightmare scenario is unfolding. US Department of Justice has officially announced they are investigating GSK for its apparent crimes in China. I believe UK regulators have made similar announcements.

Hey Witty, put that in your PDP.

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GlaxoSmithKline Bribery Scandal: US Authorities Probe Company's Operations in China
By M ROCHAN :


US authorities probe GSK's China unit (Reuters).

US authorities will probe British drugmaker GlaxoSmithKline's business practices in China in a bid to determine whether the company breached US anti-bribery laws.

The US Department of Justice (DoJ), which has been probing GSK's sales practices in several countries, has extended its investigation to the firm's China unit, reported Reuters, citing anonymous sources.

Pursued by Reuters, a GSK spokesman confirmed that the DoJ was investigating the company in China.

David Mawdsley, a spokesman for GSK in London said: "Since the investigation in China began, we have proactively reached out to relevant regulators. This includes the DoJ, and we have been in an ongoing dialogue with them."

GSK has been facing investigation in China into alleged malpractice by its executives.


The US Justice Department hopes to ascertain whether GSK, and other drugmakers, contravened the US Foreign Corrupt Practices Act, which prohibits American companies from resorting to bribery while doing business outside the US.

US authorities have jurisdiction over GSK, a British company, given that the drugmaker's stocks (American depository receipts) are traded on the New York Stock Exchange.

Earlier, Chinese police investigating GSK for alleged bribery and tax violations reportedly found that the crimes were organised by the company itself rather than individual staff members.

The official Xinhua news agency reported that Chinese police have revealed further details about the case after questioning more individuals. More people admitted to the "suspected transgressions", according to the news agency.

Earlier in the year, China's Ministry of Public Security accused unnamed GSK executives of routing 3bn yuan (£324m, €375m, $489m) in bribes to doctors through 700 travel agencies and consultancies over six years.

GSK admitted that some Chinese executives appeared to have broken the law, but CEO Andrew Witty said that their head office had no prior knowledge about the wrongdoing.

In a bid to repair its tainted image in connection with the scandal, the company appointed Herve Gisserot, senior vice-president for Europe, as the new chief of its China operations.

He replaced Mark Reilly.

Other foreign firms facing bribery allegations in China include French drugmaker Sanofi, Switzerland's Novartis and US drug giant Eli Lilly

 

Everything is for sale: China = Capitalist Heavan In Action

Looks good on paper
A flawed system for judging research is leading to academic fraud
Sep 28th 2013 | BEIJING |From the print edition The Economist

DISGUISED as employees of a gas company, a team of policemen burst into a flat in Beijing on September 1st. Two suspects inside panicked and tossed a plastic bag full of money out of a 15th-floor window. Red hundred-yuan notes worth as much as $50,000 fluttered to the pavement below.

Money raining down on pedestrians was not as bizarre, however, as the racket behind it. China is known for its pirated DVDs and fake designer gear, but these criminals were producing something more intellectual: fake scholarly articles which they sold to academics, and counterfeit versions of existing medical journals in which they sold publication slots.
In this section



As China tries to take its seat at the top table of global academia, the criminal underworld has seized on a feature in its research system: the fact that research grants and promotions are awarded on the basis of the number of articles published, not on the quality of the original research. This has fostered an industry of plagiarism, invented research and fake journals that Wuhan University estimated in 2009 was worth $150m, a fivefold increase on just two years earlier.

Chinese scientists are still rewarded for doing good research, and the number of high-quality researchers is increasing. Scientists all round the world also commit fraud. But the Chinese evaluation system is particularly susceptible to it.

By volume the output of Chinese science is impressive. Mainland Chinese researchers have published a steadily increasing share of scientific papers in journals included in the prestigious Science Citation Index (SCI—maintained by Thomson Reuters, a publisher). The number grew from a negligible share in 2001 to 9.5% in 2011, second in the world to America, according to a report published by the Institute of Scientific and Technical Information of China. From 2002 to 2012, more than 1m Chinese papers were published in SCI journals; they ranked sixth for the number of times cited by others. Nature, a science journal, reported that in 2012 the number of papers from China in the journal’s 18 affiliated research publications rose by 35% from 2011. The journal said this “adds to the growing body of evidence that China is fast becoming a global leader in scientific publishing and scientific research”.

In 2010, however, Nature had also noted rising concerns about fraud in Chinese research, reporting that in one Chinese government survey, a third of more than 6,000 scientific researchers at six leading institutions admitted to plagiarism, falsification or fabrication. The details of the survey have not been publicly released, making it difficult to compare the results fairly with Western surveys, which have also found that one-third of scientists admit to dishonesty under the broadest definition, but that a far smaller percentage (2% on average) admit to having fabricated or falsified research results.

In 2012 Proceedings of the National Academy of Sciences, an American journal, published a study of retractions accounting for nation of origin. In it a team of authors wrote that in medical journal articles in PubMed, an American database maintained by the National Institutes of Health, there were more retractions due to plagiarism from China and India together than from America (which produced the most papers by far, and so the most cheating overall). The study also found that papers from China led the world in retractions due to duplication—the same papers being published in multiple journals. On retractions due to fraud, China ranked fourth, behind America, Germany and Japan.

“Stupid Chinese Idea”

Chinese scientists have urged their comrades to live up to the nation’s great history. “Academic corruption is gradually eroding the marvellous and well-established culture that our ancestors left for us 5,000 years ago,” wrote Lin Songqing of the Chinese Academy of Sciences, in an article this year in Learned Publishing, a British-based journal.

In the 1980s, when China was only beginning to reinvest in science, amassing publishing credits seemed a good way to use non-political criteria for evaluating researchers. But today the statistics-driven standards for promotion (even when they are not handed out merely on the basis of personal connections) are as problematic as in the rest of the bureaucracy. Xiong Bingqi of the 21st Century Education Research Institute calls it the “GDPism of education”. Local government officials stand out with good statistics, says Mr Xiong. “It is the same with universities.”

The most valuable statistic a scientist can tally up is SCI journal credits, especially in journals with higher "impact factors"—ones that are cited more frequently in other scholars’ papers. SCI credits and impact factors are used to judge candidates for doctorates, promotions, research grants and pay bonuses. Some ambitious professors amass SCI credits at an astounding pace. Mr Lin writes that a professor at Ningbo university, in south-east China, published 82 such papers in a three-year span. A hint of the relative weakness of these papers is found in the fact that China ranks just 14th in average citations per SCI paper, suggesting that many Chinese papers are rarely quoted by other scholars.

The quality of research is not always an issue for those evaluating promotions and grants. Some administrators are unqualified to evaluate research, Chinese scientists say, either because they are bureaucrats or because they were promoted using the same criteria themselves. In addition, the administrators’ institutions are evaluated on their publication rankings, so university presidents and department heads place a priority on publishing, especially for SCI credits. This dynamic has led some in science circles to joke that SCI stands for “Stupid Chinese Idea”.

Crystal unclear

The warped incentive system has created some big embarrassments. In 2009 Acta Crystallographica Section E, a British journal on crystallography, was forced to retract 70 papers co-authored by two researchers at Jinggangshan university in southern China, because they had fabricated evidence described in the papers. After the retractions the Lancet, a British journal, published a broadside urging China to take more action to prevent fraud. But many cases are covered up when detected to protect the institutions involved.

The pirated medical-journal racket broken up in Beijing shows that there is a well-developed market for publication beyond the authentic SCI journals. The cost of placing an article in one of the counterfeit journals was up to $650, police said. Purchasing a fake article cost up to $250. Police said the racket had earned several million yuan ($500,000 or more) since 2009. Customers were typically medical researchers angling for promotion.

Some government officials want to buy their way to academic stardom as well: at his trial this month for corruption, Zhang Shuguang, a former railway-ministry official, admitted to having spent nearly half of $7.8m in bribes that he had collected trying to get himself elected to the Chinese Academy of Sciences. Chinese reports speculated that he spent the money buying votes and hiring teams of writers to produce books. Widely considered to be a man of limited academic achievement, Mr Zhang ultimately fell just one vote short of election. Less than two years later, he was in custody.

 

And now, bribery in Iraq & Poland too. (But, how else can one do business in those countries?)

 

And now, Jordon & Lebanon.

So widespread the reports.

Where is the common denominator?

Who is the overall responsible "leader"?

 

grow a pair everyone

Just because a new country is added to the list doesn't mean that there's anything new to the story

This is not a widening scandal, its the same scandal

We had the same corrupt practices in every country - standard practice for all of pharma

We did it here, we did it there, we did it everywhere

obla di obla da

Life goes on bro

Its just that different whistle blowers are emerging at different times

Whack-A-Mole style

But its the same scandal - nothing new

let's just admit it:

"We used every trick in the book to pump up sales in every country we did business in"

No rogues - just standard practice.

 

Have to agree that much of this is simply standard practice to get business in these markets. But then, why is this coming up now? And it has to be said that Sir Dandy Andy must have known how business is done in these & other countries (eg, these are not the only ones for sure), and now Sir Dandy Andy acts arrogantly surprised, wanting to make the company appear to have far more stringent ethical standards than they can affort to have in doing profitable business in these places.

Many years ago I felt that this company knew how to do business on a reasonably honest manner, pay employees, give long term benefits to those who made long term commitment to the company. Now, I am not sure there is any type of vision beyond next quarter's profit, no commitment to employees at all. The one thing that remains sure is that if you are a senior VP or esteemed, anointed advisor, your job is guaranteed for much longer than you are useful to the company.

 

Well, after today's quarterly disclosure and excuse-making points by Witty, there's been a lot of discussion in the media about the various bribery disclosures across several countries, and pointing out the inability for Witty's proclamation against such business to impact on how the business is actually done. Besides that this is the way business is likely done in many places, the message does not seem to have taken hold through the on-line training that has been required of all employees. Hmmmm, maybe it takes a bit more than simply posting a few on-line viewings to instill a new culture. Perhaps it needs some "leading by example", which is tough to do when managers are often so invisible to operational staff.

GSK's digging a big hole for itself, and the deeper it gets, the harder they dig to get out by doing more of the same.

GSK needs to get rid of Witty, and get someone in charge who knows something about the science & technology it takes to make a drug. Oh, yeah, one more thing.....they should not be a member of the British "would-be" elite.

 

GSK China Fraud - Case Closed

China Fines GlaxoSmithKline Nearly $500 Million in Bribery Case

By KEITH BRADSHER and CHRIS BUCKLEYSEPT. 19, 2014


HONG KONG — Global multinationals have invested billions of dollars in China over the last decade, with the prospect of selling to 1.4 billion people. But the promise of China’s growth is increasingly offset by the dangers of being caught up in the country’s anticorruption campaigns and rising economic nationalism.

In the strongest signal yet, a Chinese court on Friday imposed a fine of nearly $500 million on the British pharmaceutical giant GlaxoSmithKline for bribery, dwarfing the penalties in earlier criminal cases.

Multinational companies broadly have been under pressure in China, with technology companies, automakers and food manufacturers under investigation. As new cases and penalties have emerged, companies have been nervously preparing for their own potential fallout.

Last week, Chinese authorities fined the Audi unit of Volkswagen $40.5 million for violations of antitrust laws. In a similar case, a dozen Japanese auto parts and bearing manufacturers were assessed $200 million in penalties last month.

Beijing officials have gone out of their way in the last two weeks to deny complaints by foreign business groups and governments that China’s continuing legal crackdown represents an effort to discriminate against multinational companies and help Chinese companies compete. The Glaxo case showed that “an open China is not a lawless one,” Xinhua, the official news agency, said in a commentary.

But the Glaxo case underlines the dangers for multinationals as they continue to do business in a country where corruption has been widespread and where the legal and regulatory system has shown a greater willingness to prosecute foreign companies.

Two antitrust lawyers involved in other cases said in separate interviews that Chinese officials had rushed investigations along, sometimes in a few weeks, with little chance for multinationals to present their side. In some antimonopoly cases this summer, multinational company executives have not even been allowed to bring their lawyers to meetings with regulators, the lawyers said, both of whom insisted on anonymity because they were representing clients in litigation.

In many cases, regulators demanded that multinationals sharply reduce prices for products. Glaxo and a growing list of automakers have already done so.

Few companies have faced the level of scrutiny that Glaxo has. But no other multinational has acknowleged that its senior managers oversaw such a spree of bribe-giving and illicit sales tactics.

Chinese authorities accused Glaxo of bribing hospitals and doctors, channeling illicit kickbacks through travel agencies and pharmaceutical industry associations — a scheme that brought the company higher drug prices and illegal revenue of more than $150 million. In a rare move, authorities also prosecuted the foreign-born executive who ran Glaxo’s Chinese unit.

After a one-day trial held in secrecy, the court sentenced Glaxo’s British former country manager, Mark Reilly, and four other company managers to potential prison terms of up to four years. The sentences were suspended, allowing the defendants to avoid incarceration if they stay out of trouble, according to Xinhua. The verdict indicated that Mr. Reilly could be promptly deported. The report said they had pleaded guilty and would not appeal.
Continue reading the main story
Continue reading the main story

Glaxo said in a statement that it “fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities.” “GSK P.L.C. sincerely apologizes to the Chinese patients, doctors and hospitals, and to the Chinese government and the Chinese people.”

The British Embassy in Beijing said that it had no information on the possible deportation of Mr. Reilly and that while an appeal remained possible, it would have no comment on the trial.

“We note the verdict in this case,” an embassy spokesman said. “We have continually called for a just conclusion in the case in accordance with Chinese law. It would be wrong to comment while the case remains open to appeal.”

The court said that in deciding how to punish Mr. Reilly, it had taken into account that he had returned from Britain to face the investigators, and that he had “truthfully recounted the crimes of his employer,” meriting a relatively lenient punishment, the Xinhua report said. The other defendants also confessed and also earned relatively light sentences, according to the report.

The Glaxo case — and sizable fine — represents a setback for the company.

When the accusations first emerged last year, the company said that employees were “outside of our systems of controls.” It said the scandal involved a few rogue Chinese-born employees.

But the case escalated in May, when Chinese police accused Mr. Reilly, a Briton, of orchestrating a “massive bribery network.” Mr. Reilly and two Chinese-born executives, Zhang Guowei and Zhao Hongyan, had even bribed government officials in Beijing and Shanghai, they said. The names of the other defendants are Liang Hong and Huang Hong.

In its statement, Glaxo said that the court, the Changsha Intermediate People’s Court, had found the company guilty only of bribing nongovernmental personnel. The statement made no mention of any conviction for bribing government officials, a more politically delicate issue as President Xi Jinping of China pursues a broad campaign to root out corruption.

The accusations sent a chill through the industry when they came out last year. Many global drug makers used the same Shanghai travel agency that the authorities in the Glaxo case said had altered corporate travel expenses to pay cash bribes.

“It’s very hard to do business in the Chinese health care and pharmaceutical sectors without doing payoffs,” said David Zweig, the director of the Center on China’s Transnational Relations at the Hong Kong University of Science and Technology. “Everyone else pays bribes. Glaxo just got caught.”

Glaxo has also loomed large over another case.

In August, business partners in the investigative firm ChinaWhys were sentenced by a Chinese court after they were hired by Glaxo to look into whether a former employee was passing information about suspicions of fraud at the company to Chinese authorities.

Glaxo hired the couple in spring 2013 to look into whether a former employee had sent the company emails and a sex video of Mr. Reilly recorded without his knowledge or consent, according to people who were briefed on the situation and spoke on the condition of anonymity. The video was recorded with a camera inside his Shanghai apartment bedroom.

ChinaWhys, which specialized in due diligence work, completed an inconclusive preliminary report on the sex video of Mr. Reilly by June 2013 and suggested continuing the inquiry. In July 2013, the couple was detained, and they were formally arrested a month later, accused of illegally obtaining private information for their company.

The couple’s family has said the arrests were almost certainly linked to the Glaxo investigation, adding that Glaxo had not told Peter Humphrey, one of the investigators, the full details of the person suspected of being a whistle-blower.

Mr. Humphrey was sentenced to two and a half years in prison. The other, his wife, Yu Yingzeng, who is a Chinese-born American citizen, was sentenced to two years. The court said Mr. Humphrey would be deported after he served his term.

Glaxo appeared to distance itself from ChinaWhys in its statement Friday evening, saying that, “GSK P.L.C. also apologizes for the harm caused to individuals who were illegally investigated by” one of its subsidiaries in China.

Jane Perlez contributed reporting from Beijing.

 

Well it took 10 years and 100 million dollars but GSK is closing its Neuroscience R&D hub.

So easy to predict GSK's colossal blunders.