GlaxoSmithKline has been hit with the largest corporate fine ever imposed by China after the company pleaded guilty to allegations of bribery.
The £297m fine is the culmination of an investigation by the Chinese authorities relating to allegations that GlaxoSmithKline (GSK) bribed various doctors and health organisations to entice them to use its drugs.
Alongside the company being hit by this massive fine, several GSK managers have also received suspended prison sentences. Four managers have received sentences varying from two to four years. The former head of GSK’s Chinese operation, Mark Reilly, was sentenced to three years in prison, suspended for four years.
Although GSK’s, involvement with the Chinese authorities in relation to these allegations may now have concluded, this may still not be the end of the road for GSK, or those that run the company.
There are separate accusations of bribery in Iraq, Jordan, Lebanon, Poland & Syria. Furthermore, the Serious Fraud Office in the UK (SFO) is investigating how the company conducts its business around the world, including their practices in China. The U.S. Department of Justice (DOJ) is also conducting its own investigation.
The Serious Fraud Office will be investigating GSK’s conduct in the context of the Bribery Act 2010. The Bribery Act is one of a very limited number of statutes that allows the UK authorities to prosecute acts and omissions overseas, and UK citizens who commit bribery abroad can be prosecuted in the UK even though all the conduct may have occurred overseas.
Perhaps more significantly, GlaxoSmithKline may also risk the corporate offence prosecution of failing to prevent bribery. If a person associated with the company is found to have bribed another person intending to obtain or retain business for GSK or to obtain or retain an advantage in the conduct of business for GSK, then GSK will potentially have committed this offence.
The offence is in effect one of strict liability, unless GSK is able to establish the available statutory defence and show that it had adequate procedures in place designed to prevent bribery. However, based on the GlaxoSmithKline investigation in China and the subsequent guilty plea and statement from the company, this defence may prove difficult to establish if the Serious Fraud Office elects to prosecute.
The corporate offence had not been prosecuted to date and both the business and legal communities eagerly await the way in which it will be applied and interpreted by the Courts. GSK may though seek to secure the first ever Deferred Prosecution Agreement (DPA), for more information see Deferred Prosecution Agreements.
If a Deferred Prosecution Agreement is possible, GlaxoSmithKline would not be formally prosecuted although it would still be sanctioned with a fine and/or confiscation in addition possibly to being monitored for a number of years by an independent bribery expert to ensure that its future business if free of corruption.
The Serious Fraud Office has had the ability to deploy Deferred Prosecution Agreements since February 2014 and the objective of a DPA is to promote greater corporate responsibility. The idea being that if company’s come forward to self-report problems they may avoid full prosecution.
The benefit to the Serious Fraud Office is that it may get to learn about conduct it would have otherwise not known about and be getting cooperation from the business community it will be able to show that it is taking a pragmatic but tough line on corporate wrong doing.
Further, if the bribery in China can be proved to have been committed with the consent or connivance of a senior GlaxoSmithKline officer the company could also held liable for the offending and, if so, sanctioned with an unlimited fine and/or confiscation.
GlaxoSmithKline’s troubles in China could therefore be just the start of a trying period for the company. The Serious Fraud Office may seek to use the case to demonstrate that, no matter where a firm chooses to conduct its business, it will still be within reach of the UK Courts.
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Related blog: The Power of The Bribery Act: A Wake Up Call from China.
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