China bans Glaxo Executive from leaving

Travel Ban connected to Chinese Investigation into alleged bribery by pharmaceutical company.

Chinese authorities investigating alleged bribery by pharmaceutical giant GlaxoSmithKline have barred the company's finance chief in China, British national Steve Nechelput, from leaving the country, Glaxo said Wednesday.

Meanwhile, the U.K.'s Serious Fraud Office is reviewing the bribery allegations Glaxo faces in China, people familiar with the matter said.

The review involves both allegations sent to the office by an anonymous tipster and those made publicly by Chinese authorities, these people said.

The review is at a preliminary stage.

The travel ban faced by Mr. Nechelput, Glaxo's vice president for finance in China, is connected to the bribery investigation, but he hasn't been questioned, detained or arrested, Glaxo said.

Mr. Nechelput is free to move around the country but isn't allowed to leave China, the company said, adding that he "continues in his role as finance director for GSK China."

The travel ban has been in place since the end of June, Glaxo said.

The company declined to comment further on Mr. Nechelput or to make him available to comment. China's Ministry of Public Security didn't respond to requests for comment on Mr. Nechelput.

A spokesman for the U.K. Consulate in Shanghai said Wednesday that consular officials are in close contact with Glaxo regarding Mr. Nechelput, who is based in Shanghai.

"We are aware of an incident on the 27th of June involving British national Steve Nechelput, and we are providing consular assistance," the spokesman said, declining to disclose further details.

China's investigation, which publicly kicked off in late June, has caused upheaval among Glaxo's senior management in China.

In addition to putting a travel ban on Mr. Nechelput, authorities have detained four of Glaxo's high-level Chinese executives over allegations that they "severely violated" Chinese law.

The executives are, according to China's official Xinhua News Agency, Liang Hong, Glaxo's China vice president and operations manager; Zhao Hongyan, a legal-affairs director for the company; Zhang Guowei, a human-resources director; and Huang Hong, a business-development manager. They couldn't be reached to comment.

According to a person familiar with the matter, Glaxo's top executive in China, general manager Mark Reilly, left the country in early July for London and is currently working in the company's London offices.

This person described Mr. Reilly's travel as a routine business trip. Mr. Reilly was in Glaxo's China offices when officials from the Ministry of Public Security first visited in late June to collect documents at the start of their investigation, this person said. Mr. Reilly wasn't questioned or detained, the person added. Mr. Reilly couldn't be reached to comment.

China has accused Glaxo of using travel agencies as vehicles to bribe government officials, hospitals and doctors in order to sell more drugs at higher prices.

Glaxo has said it is deeply "concerned and disappointed by these serious allegations of fraudulent behaviour and ethical misconduct."

It added that "GSK has zero tolerance for any behaviour of this nature" and that the alleged behavior would be a breach of the company's standards.

Mr. Nechelput has been in the company's China division for only one of his 23 years at Glaxo, according to an account on social media site LinkedIn that matches his title and work credentials.

Previously he worked for the company in Singapore, the U.S. and Latin America, according to the profile.

On Monday, Gao Feng, a Ministry of Public Security official spearheading the Glaxo probe, said authorities had not detained foreign executives of Glaxo.

"No foreign nationals have been taken, but I can't promise you anything going forward," Mr. Gao said.

China has taken action against foreign companies and individual foreign executives at times, such as in 2010 when a Chinese court handed a 10-year prison sentence to an Australian employee of mining company Rio Tinto, Stern Hu, finding him guilty of accepting around $935,000 in bribes.

In the U.K., meanwhile, a spokeswoman for the Serious Fraud Office wouldn't comment on the agency's interest in the Glaxo situation.

The Serious Fraud Office, the U.K. agency responsible for investigating major corruption, received allegations from an anonymous tipster in January, people familiar with the matter said.

The agency began reviewing those allegations in recent weeks, the people said, coinciding with a crackdown by Chinese authorities.

The tipster also sent the allegations to Glaxo in January, which, as previously reported by The Wall Street Journal, sparked an internal investigation at the company.

The tipster alleged that Glaxo's China-based sales staff was involved in widespread bribery of doctors to prescribe drugs, in some cases for unauthorized uses, between 2004 and 2010.

It is unclear if the tipster's allegations are related to the Chinese authorities' investigation. Chinese officials said Monday that their allegations have been made on the basis of a police investigation and not on the basis of information from a tipster.

Glaxo previously said it found no evidence of wrongdoing related to the tipster's claims after conducting a four-month investigation.

(Published by WSJ - July 17, 2013)