3 July 2014
Last updated at 22:01
By Carrie Gracie BBC China editor Allegations that pharmaceutical giant GlaxoSmithKline (GSK) systematically bribed doctors in China are credible, says an investigator hired by the firm.
Peter Humphrey was hired only to investigate who was behind a suspected smear campaign against GSK.
But after he finished his report, he learned the details of further allegations against the firm and told colleagues he believed they were true.
GSK told the BBC it did not tolerate corruption in its business.
"We have many policies, procedures and controls in place to monitor this and take action against any breaches. As we have said previously, the allegations that have been raised are deeply concerning to us. We are learning lessons from this situation and we are determined to take all actions necessary as a result," it said in a statement.
The allegations against GSK's China operation first emerged in an email in January 2013 from an anonymous and self-styled whistleblower to the company.
Continue reading the main story This investigation did not find evidence to substantiate the specific allegations made in the emails"
End Quote GSK statement The email, which the BBC has seen, alleges that GSK's sales teams targeted influential doctors with expensive gifts and cash to win business.
It also alleges that some doctors were sent on all expenses-paid holidays masquerading as conferences. The payments were funnelled as fictional expenses through a travel agent.
GSK told the BBC that it had investigated the allegations using external legal and audit advice.
"Some fraudulent behaviour relating to expense claims was identified, and this resulted in employee dismissals and further changes to our monitoring procedures in China.
"However, this investigation did not find evidence to substantiate the specific allegations made in the emails," a GSK statement said.
Since the case came to light, four senior GSK executives have been detained by Chinese police and the former head of GSK China, Mark Reilly, is also effectively detained. Mr Humphrey will stand trial later this year for illegally buying and selling private information.
How case unfolded: • December 2012 - Vivian Shi Wen dismissed from GSK
• January 2013 - Email sent to GSK boss alleging bribery, with sex tape featuring China chief Mark Reilly attached
• April 2013 - Peter Humphrey hired to investigate
• July 2013 - Police detain four GSK employees
• Mr Humphrey and his wife arrested for allegedly buying and selling personal information - no link made with GSK case
• May 2014 - Chinese authorities accuse Mr Reilly of overseeing bribery network
• July 2014 - China says Peter Humphrey and wife will be tried in secret
Sex tape Mr Humphrey's involvement with the case was sparked not by the bribery allegations but by a sex tape which allegedly showed Mr Reilly in his Shanghai apartment with his girlfriend. Mr Reilly says it was filmed without his knowledge or consent.
The video was sent to GSK's London-based CEO Andrew Witty with an email accusing Mr Reilly of being behind systematic corruption in the company's China operation.
Mr Humphrey's company, ChinaWhys, was hired to try to identify who the anonymous whistleblower was. GSK suspected a former senior staff member, Vivian Shi Wen, who was dismissed at the end of 2012. ChinaWhys was also asked to find out how the video had been filmed and who was behind it.
Ms Shi has previously denied being the GSK whistleblower. Attempts by the BBC to reach her have been unsuccessful.
Mr Humphrey delivered his report about Ms Shi in June 2013, a copy of which has been seen by the BBC. However, the investigation produced no evidence of who was behind the sex tape.
But shortly afterwards, Mr Humphrey and his Chinese wife Yu Yingzeng, who he was working with, were arrested.
The Chinese authorities have not made any explicit link between GSK and the charges against the couple but they have said that their trial next month will be held in secret.
One of the most extraordinary aspects of the case is that Mr Humphrey was not shown the whistleblower's email allegations against GSK when he was hired to investigate Vivian Shi.
In a statement dictated from prison, Mr Humphrey said that when he offered to look into the allegations, GSK told him they had already found them to be untrue. But when he finally saw the whistleblower's email, just weeks before his own arrest, he made it clear that he believed the allegations were credible.
In an email to colleagues he said: "I can only assume that they didn't give them to us because they were afraid we would find the allegations credible and start verifying them... Actually I do believe every word of these allegations. They are totally credible."
GSK has not commented on why Mr Humphrey was not given the full details of the allegations earlier.
Whistleblower allegations What is notable about the documents the BBC has seen is not just the scale of the allegations against the company, but also the detail within them. The whistleblower's email alleges that the firm's aggressive marketing strategies "constitute bribery in the vast majority of cases". It further alleges:
- GSK falsified its records to conceal illegal practices including bribery and promoting the use of drugs for not yet approved purposes
- The practice of giving cash to doctors to sell products was common
- GSK fabricated an internal "compliance" scheme which effectively covered up widespread corruption
- The firm failed to investigate its entire sales team
The email names specific doctors and hospitals and also quotes individual GSK executives and their private email accounts.
GSK said its own investigation had not found evidence to back the claims in the email.
"Our China business is now subject to an ongoing investigation by the Chinese authorities with which we are fully cooperating. We have also hired an external law firm, Ropes and Gray, to conduct an independent review into what happened in our China business during this period," the statement said.
Bribery is widely believed to be endemic in China's pharmaceutical sector, which has witnessed explosive growth in recent years.
While GSK has accepted that individual employees in China may have behaved inappropriately in China, it has consistently denied they acted on instructions of the company. If the company were found to be liable, it could face enormous fines from UK and US authorities who have fierce anti-bribery regulations.
The crisis at GSK unfolds against a backdrop of a determined anti-corruption campaign spearheaded by China's leader Xi Jinping.
In the past few days alone, one of China's most senior military figures and a swathe of top officials from China's state oil company have been expelled from the Communist Party.
