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EXCLUSIVE-Allegations of GSK corruption spread to Syria

Source: Reuters - Thu, 24 Jul 2014 17:19 GMT
Author: Reuters
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In this 2008 file photo, signage is pictured on the company headquarters of GlaxoSmithKline in west London REUTERS/Toby Melville
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* Email lists alleged bribes to push GSK consumer products

* GSK plans thorough investigation of allegations

* GSK already faces bribery claims in five other countries

* U.S. and British authorities probing drugmaker

By Ben Hirschler

LONDON, July 24 (Reuters) - GlaxoSmithKline faces new allegations of corruption, this time in Syria, where the drugmaker and its distributor have been accused of paying bribes to secure business, according to a whistleblower's email reviewed by Reuters.

Britain's biggest drugmaker said on Thursday it was investigating the latest claims dating back to 2010, which were laid out in the email received by the company on July 18.

The allegations relate to its former consumer healthcare operations in Syria, which were closed down in 2012 due to the worsening civil war in the country.

"We have zero tolerance for any kind of unethical behaviour. We will thoroughly investigate all the claims made in this email," GSK said in a statement.

GSK has been rocked by corruption allegations since last July, when Chinese authorities accused it of funnelling up to 3 billion yuan ($480 million) to doctors and officials to encourage them to use its medicines. The former British boss of the drugmaker's China business was accused in May of being behind those bribes.

Since then, smaller-scale bribery claims have surfaced in other countries and GSK is now investigating possible staff misconduct in Poland, Iraq, Jordan and Lebanon.

Syria is the sixth country to be added to the list. The allegations there centre on the company's consumer business, including its popular painkiller Panadol and oral care products.

Although rules governing the promotion of non-prescription products are not as strict as for prescription medicines, the email from a person familiar with GSK's Syrian operations said alleged bribes in the form of cash, speakers' fees, trips and free samples were in breach of corruption laws.

The detailed 5,000-word document, addressed to Chief Executive Andrew Witty and Judy Lewent, chair of GSK's audit committee, said incentives were paid to doctors, dentists, pharmacists and government officials to win tenders and to obtain improper business advantages.

"GSK has been engaging in multiple corrupt and illegal practices in Syria and its internal controls for its Syrian operation are virtually non-existent," the email said.

In addition, the email said GSK had engaged in apparent Syrian export control violations, including an alleged smuggling scheme to ship the drug component pseudoephedrine to Iran from Syria via Iraq. Pseudoephedrine is regulated as a precursor for making methamphetamine.

GSK said it would investigate this matter along with the bribery claims.

"We welcome people speaking up if they have concerns about alleged misconduct," the company said.

"On 18 July 2014, we received an email making claims regarding GSK's former consumer operations and related distributors in Syria. Our compliance and legal departments were immediately notified and, as is our standard procedure, we immediately responded to the sender to confirm receipt and ask for more information."

The whistleblower's email said GSK used its own employees and Syrian distributor Maatouk Group to make illicit payments.

An official at Damascus-based Maatouk had no comment when contacted by telephone and said the company's top executives were not immediately available.

HOLIDAY RESORT

The email listed a range of alleged improper activities, including payments of $1,500 each to two doctors to promote Panadol. The document also highlighted bribes paid to pharmacists and payments for medics to visit a Mediterranean holiday resort.

Further cash payments were related to the promotion of GSK cold and flu products, as well as its premium toothpaste brand Sensodyne.

Bribery charges around the world have tarnished the reputation of Witty and hit the company's sales in China, at a time when it is also struggling with sluggish sales growth in the all-important U.S. market.

The allegations also leave it open to legal action - and potentially hefty fines - in Western countries where it is based or has a stock market listing.

Britain's Serious Fraud Office launched a formal criminal investigation into GSK's overseas activities in May and the U.S. Department of Justice (DOJ) is investigating it for possible breaches of the Foreign Corrupt Practices Act (FCPA).

In the email sent to GSK concerning Syria, the author said that the information would be passed on to the DOJ and the U.S. Securities and Exchange Commission (SEC).

A recently introduced SEC programme provides cash incentives for whistleblowers to report corporate malpractice, including breaches of the FCPA.

GSK has overhauled its marketing policies in the wake of concerns about possible past misconduct. It aims to become the first company in the industry to stop paying outside doctors to promote its products. ($1 = 6.1944 Chinese Yuan) (Reporting by Ben Hirschler; editing by David Clarke)

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