China 1: GSK like 'Criminal Godfather', say police

In a rare public briefing - which proves if nothing else that the Chinese are serious about making a lot of noise about the matter - Gao Feng the lead investigator on the GSK probe, said that police are investigating 3bn Yuan (£323m) worth of alleged bribery payments from as far back as 2007.

‘We found that bribery is a core part of the activities of the company’ said Gao. ‘To boost their prices and sales the company performed illegal actions.’

Four top GSK executives - all Chinese nationals - have been detained over the scandal, which relates to payments allegedly made to Chinese doctors and lawyers in order to boost the prescription and sales of GSK drugs in the country. The head of GSK in China, an English national, left the country when the probe was announced and has yet to return.

The allegations centre on the claims that travel agencies paid by GSK would invent fictitious meetings that involved staff travel. The budgets for this travel would then be appropriated and used to bribe official and doctors to prescribe GSK drugs.

Last week, GSK said that an internal investigation has found no evidence of bribery or corruption of doctors or officials, but that it would act promptly on receipt of any such evidence. The Chinese police also claim that money laundering and bribes ‘of a sexual nature’ were involved.

That’s quite a catalogue of alleged wrongdoing. So what are we to make of it all? The first thing to say is that this appears to be part of a pattern whereby the Chinese authorities are generally getting heavy with a range of foreign-owned firms, including Tetra-Pak and Nestle, over pricing and claimed anti-trust activities.

A clue that this might be part of such a broader attack is Gao’s hint that evidence of money transfers by other foreign drugs firms has been found, and that some of these might yet be drawn into the investigation. Against a background of faltering economic growth in China, this looks, at least in part, like something of a diversionary tactic.

The other general point to make is that, where bribery does occur, it rarely happens in a vacuum. It is rather a symptom of the way business is conducted in that environment. For every briber, there has to be a willing bribee.

Whatever the truth of what is going on here (and that may be very hard or even impossible to establish) it is most unusual for it to have gone so explosively public. It’s quite possible that neither the investigators nor the investigated will end up coming out of it very well.