The Serious Fraud Office (SFO) has launched a criminal investigation into GlaxoSmithKline‘s (LSE: GSK) (NYSE: GSK.US) commercial practices, GSK said in a short statement today. The UK’s largest drugs company added that it will “co-operate fully” with the SFO, and that it is “committed to operating its business to the highest ethical standards.”
1. What is GSK accused of?
GSK has refused to comment on specific details of the probe. It is thought that the investigation was sparked by an insider making allegations against the firm, and a spokesperson for the SFO commented that “whistleblowers are valuable sources of information … We welcome approaches from anyone with inside information on all our cases including this one.”
2. Ongoing allegations
Earlier this month three GSK staff were charged with corruption in China — thought to have accrued over £100m in illegal revenues. Mark Reilly, the former boss of GSK’s China business, and two Chinese executives are accused of bribing doctors, hospital officials and government staff to boost sales.
3. Will GSK be fined?
If GSK is found guilty it is at risk of being fined under the UK Bribery Act or the US Foreign Corrupt Practices Act (FCPA). In 2008 the Siemens paid the largest ever FCPA enforcement action relating to foreign bribery — costing the German company $800m. If GSK can demonstrate that it proactively alerted SFO investigators to any wrongdoing then — potentially, as relating to the 2010 Bribery Act — GSK could be considered for immunity from prosecution.
Shares in GlaxoSmithKline fell 1.7% to 1,608p during early trade this morning.
