A major scandal engulfing the British pharmaceutical company Glaxo Smith Klein has taken another turn. The Chinese government has accused GSK of systemic bribery and corruption. Its top executive in China is under arrest.
And now, a private investigator Glaxo hired -- who's also been detained -- says he believes these allegations of impropriety are credible.
Marketplace's Stephen Beard has been following the story from London, and says Glaxo's executives recieved emails last year from a self-proclaimed whistle-blower claiming that officials with the company had bribed doctors and hospitals in China to buy Glaxo's drugs at inflated prices. Glaxo investigated the claims, and says that while it uncovered some unrelated fraudulent activity, it did not find any evidence of bribery.
GSK also claims it has been the target of a smear campaign.
"And there does seem to be something in that," says Beard, "Someone, for example, secretly filmed the top Galxo executive in China having sex with a woman who was in that classic tabloid phrase, 'not his wife'."
Beard also says that Glaxo is under a deal of pressure from Chinese authorities to push down the prices it and other Western drug companies charge in the country.
Andrew Halper of the international law firm Olswang spoke to the BBC about how non-Chinese corporations in China are vulnerable.
"Foreign companies don't benefit from cover, they don't benefit from connections," says Halper, "They rarely, if ever, will have that sort of thing to protect them; they're exposed."
The twist in the story, however, is that private-eye who turned on Glaxo to say the charges may have merit.
"After recieving the sex tape, Glaxo hired this private eye to find out who was trying to smear the company," says Beard, "He submitted his report, was then in days arrested by the Chinese authorities. But here is, as you say, the latest wrinkle: It's now emerged, having seen some of the whistle-blowing emails, the investigator thinks those bribery allegations are entirely credible."
Since Glaxo only generates about three percent of its revenue from China, it may not suffer a huge amount of damage from this scandal, in terms of its overall business in the region. But the company may be looking at some collatoral damage as British fraud regulators are opening their own investigation. The Department of Justice is rumored to be taking an interest in the case as well.