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After China GlaxoSmithKline (GSK) Faces Criminal Probe by the UK oversight Serious Fraud Office

What are the major components and attributes associated with implementing an effective GRC program in China? The 8th annual European GRC summit offers a 2 part session on doing business in China. Foreign subsidiaries continue to enter the Chinese market. It is important to keep in mind the fundamental cultural differences in China and e.g. Scandinavia and other Western countries. The two sessions will explore the latest in Risk Management, Governance and Compliance challenges on the Chinese sub-continent. From how to communicate with regulators, suppliers, and third parties to what a foreign subsidiary can do to remedy the compliance risks in China.
Luka Lu, LLM, Capital Associates, PRC Lawyers
Signe Elbęk, LLM, Corporate Compliance Officer, Corporate Legal & IP, Coloplast.

Some weeks ago China wrapped up a yearlong bribery investigation into GSK's operations. The result was bribery charges against the managing director of GSK China. The accusation is that GSK ordered their sales teams to bribe hospitals, doctors, and other healthcare institutions, to promote drug sales. Apparently the malpractice resulted in extra billions of Yuan in increased revenues for the company.

Systematic approach to zero tolerance
That was just the beginning of the twisted Bribery, Fraud and Corruption (BFC) issues that need some serious monitoring. The Pharmaceutical giant GSK announced earlier this week that it had become the object of yet another criminal investigation. Now the British government is SFO that opened a formal criminal investigation into the group's commercial practices.

All companies in reality are committed to operating its business to the highest ethical standards. However, they often forget to develop a thorough annual assessment and certification of their BFC process to reduce most BFC risks, improve accountability, transparency and governance.

Systematic approach to documenting and disclosures
We have reiterated that only updated controls enable business to combat and embed BFC. The twelve principles of Copenhagen Charter can help with the annual assessment to build into the governance system and employee code of conduct ensuring a systematic approach to zero tolerance;
  • The annual assessment includes experienced consultants that can explore issues and do the necessary due diligence on documenting, reporting and disclosures.
  • The charter can further assess and certify the current situation and consider issues, complex organization & ownership structures, conduit payments, or the use of shell companies/charities to filter BFC activities.
  • The final part of phase I is to use the findings to customise different sites to encompass the entire supply chain, depending on individual needs and level of BFC assessment.

BFC issues are often symptomatic of wider malaise
Just a few years ago GSK agreed to $3 Billion Settlement with US Justice Department when the company pleaded guilty to a three-count criminal information, including two counts of introducing misbranded antidepressant drugs interstate commerce and one count of failing to report safety data about the diabetes drug to the FDA.

In 2009, a GSK employee circulated a list of "innovative ideas" from a senior colleague on how to increase sales of GSK respiratory medicine.

Based on our experience our advice to the rest of the global companies is to look into the following issues first:
  • Reflect on aggressive marketing strategy and tactics
  • Encourage employee to raise concerns about internal marketing practices.
  • Scrutinise and monitor lavish entertainment and payments and gifts ranging from pedicures to skiing or beach weekends at luxury resorts
  • Sales managers are finding better ways to hide overcharging of items to conceal malpractice
  • Look out for high bonuses for sales staff linked to rises in sales volume
  • Update the Code-of-Conduct e-learning exercises to discover false conduct
  • Implement corporate integrity agreements to monitor ethical practice to prevent fresh problems.
  • Avoid setting schemes in motion on a personal level that perceive the potential benefits as outstripping the potential costs

The main lessons from our findings and workshops are that BFC crime does pay so avoid a lengthy and uncertain legal battle with the oversight authorities. Contact us to deploy a highly skilled and experienced consultants, lawyers and auditors with several years of experience in auditing, forensic investigation & related BFC business processes.