Antitrust Lawyer Blog Commentary on Current Developments

GSK Employees in China Sue Management Over Unreimbursed Bribes

On May 28, 2014, the Financial Times (“FT”) reported that junior employees and sale staff of GlaxoSmithKline (“GSK”) China is suing their management over unreimbursed “bribes” paid, at the management’s behest, to hospitals and doctors.

In the allegations put forth by the employees, the management of GSK China directed staff to purchase fake receipts to cover up the cost of the bribes paid. In some instances, managers’ bribe directives were sent over personal emails, while junior employees were instructed to take out expenses (on the bribes) on behalf of their managers. All this was done to boost the sale of GSK drugs. These employees were also warned to not implicate their managers in any inquiries.

In March, disgruntled GSK China employees sent 25 representatives to GSK’s China headquarters in Shanghai, demanding reimbursements amounting to thousands of dollars per employee. They also accused the management of threatening them with denied bonuses and dismissal for the bribes, despite simply following the orders of their superiors.

This has come on the heels of a high-profile Chinese probe in July 2013 into bribery and other illicit practices conducted by GSK China. GSK’s China sales have subsequently tumbled, despite the country being a growth market prioritized by the head office in London.

Consequently, GSK announced that it is redoubling efforts to audit expenses claims made by GSK China. In April, the company announced that a “very small percentage” of its 7000-strong China team has been dismissed following an audit of expense claims.

In addition, the company announced a change in the company’s marketing practices, including an end to target-based pay to sales representatives.

 

Mark Ye
202-589-1834
mye@dbmlawgroup.com