It seems as though the theme of GlaxoSmithKline’s (NYSE:GSK) year thus far is “corruption,” with the past few months unraveling several different investigations of bribery and corruption in China, Poland, Jordan, Iraq, and Lebanon. Now, a GSK executive has been charged with leading a network of corruption within China’s pharmaceutical company.
Mark Reilly, currently head of GSK’s China unit, was apparently caught off-guard by the accusations, and wasn’t expecting to face the specific allegations that have since been laid against him. Reuters notes that the charges Reilly faces are the most serious corporation corruption charges ever leveled against a foreign national in China.
Reilly, in addition to heading GSK’s China unit, also serves as the firm’s legal representative in the country, according to Reuters. He is being charged with ordering his sales team and his subordinates to bribe hospital doctors, healthcare organizations, and other parties in an effort to increase drug sales for GSK. The charges are being leveled following a 10-month probe in which officials found that his efforts helped GSK raised billions of yuan in additional revenue between 2009-2012.
The Wall Street Journal says the move may be part of a larger effort on the part of the Chinese government to stamp out the pervasive corruption and bribery in its unbridled pharmaceutical industry. The charges laid against Reilly, The Journal continues, are evidence that China isn’t messing around this time, and it’s willing to use a heavy hand in order to clean up its economy — even if that means taking foreigners to task.
It sounds as though China may be meaning to make Reilly an example for other foreign companies looking to cheat the system in China. “All companies will look at this when they make business plans in China,” said Geoffrey Sant, special counsel at Dorsey & Whitney LLP, per The Wall Street Journal. “People always say they will never put a Briton or an American in jail. But they will, and this is just that example,” added.
“Companies will see that if authorities are willing to accuse even a foreigner, who is in senior management, the issue is being taken seriously,” said Helen Chen, director and partner at the consultancy firm L.E.K. “It’s a clear message that bribery is unacceptable in the market,” Chen added, per The Wall Street Journal.
The last prominent foreign executive to be faced with such serious corruption charges was Stern Hu, an Chinese-born Australian national and executive at Rio Tinto, a mining operation. In 2010, Hu was sentenced to 10 years in prison under bribery charges.
Reilly, for his part, wasn’t expecting the charges. “I’ve had regular contact with Mark over the past few months. I would think that this state of affairs is a surprise to him. The fact that Mark’s name was on the list of people charged was definitely a surprise,” an anonymous source told Reuters. “I don’t think he is prepared, or thought that he could be culpable,” the source, who is an industry executive in China, added.
GSK has responded to the allegations with a statement, in which the company calls the charges “deeply concerning.” The British pharmaceutical giant also said that it hoped a resolution could be reached which would allow it to continue to operate in China, which is an important growth market for the pharmaceutical industry. “We take the allegations that have been raised very seriously,” the statement reads.