Thirty Glaxo Employees Under China House Arrest, Telegraph Says

At least 30 GlaxoSmithKline Plc (GSK) employees are under house arrest and constant surveillance in China as part of an ongoing investigation into the company, the Telegraph reported.

Those detained include five or six executives, among them Glaxo’s legal counsel in China, who has been cut off from communication with the head office, the newspaper said, citing an unidentified person familiar with the situation. Glaxo isn’t commenting further on the investigation at this stage pending more information from Chinese authorities, the London-based company said in an e-mail today.

Some Glaxo executives admitted to corruption in China, after authorities found evidence of serious commercial bribery and tax-related crimes, the nation’s Ministry of Public Security said yesterday in the first government statement detailing its probe into allegations against the company. Glaxo has found no evidence of bribery or corruption of doctors or officials in China, the U.K.’s biggest drugmaker said in an e-mail yesterday.

At least one British national is involved and being given consular assistance, the Telegraph reported.

“We are aware of an incident in Shanghai, China, involving a British national,” Kate Alden, a spokeswoman at the British Embassy in Beijing, said in an e-mail. “We are providing Consular assistance.” She declined to give more details or confirm whether the person worked at Glaxo.

Glaxo has hired Jun He law firm to represent the company, the newspaper reported. Two calls and an e-mail sent to the Beijing offices of Jun He seeking comment weren’t returned.

Bribery Allegations

The drugmaker is suspected of trying to increase sales channels and prices by using avenues such as travel agencies to bribe or sponsor projects of government officials, medical associations, hospitals and doctors, and faking tax receipts, the Public Security Ministry said yesterday.

The suspected executives from Glaxo and officials from relevant travel agencies confessed to the crimes in a preliminary interrogation, according to the ministry’s statement on its website. It didn’t identify the individuals or travel companies.

“We are willing to cooperate with the authorities in this inquiry,” Glaxo said in yesterday’s statement.

Public security officials in the city of Changsha were investigating senior executives at Glaxo China on suspicion of economic crimes, the city’s police said on its official blog on June 28, without elaborating.

Earlier Claims

Glaxo said July 8 that it was probing a complaint about how employees in China sell Botox to doctors, and its inquiries had found no evidence of bribery or corruption in relation to sales of the wrinkle treatment. The company found no evidence of wrongdoing after completing a four-month investigation into a whistle-blower’s claims of corruption and bribery at its China business, the drugmaker said June 13.

Glaxo fell 0.6 percent to 1,742.50 pence in London trading yesterday. The stock has returned 31 percent this year, outpacing the 17 percent gain for the Bloomberg Europe Pharmaceutical Index.

The company doesn’t break out revenue from China in its earnings reports. Sales in China make up just under 3.5 percent of its global pharmaceutical revenue, according to Mark Clark, an analyst at Deutsche Bank AG in London.

To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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