The SEC has charged GlaxoSmithKline with violations of the internal controls and recordkeeping provisions of the Foreign Corrupt Practices Act. According to the Commission, the company engaged in a scheme to provide gifts to certain Chinese individuals and entities in order to improperly influence them and falsely recorded the transactions as legitimate expenses in its books and records. Without admitting or denying the allegations, the company agreed to review and report to the SEC on its remediation of its compliance measures and to pay a $20-million civil penalty (In the Matter of GlaxoSmithKline plc, Release No. 34-79005, September 30, 2016).
Bribery scheme. GlaxoSmithKline plc (GSK) is a global provider of pharmaceutical and health care products organized in the U.K. with a subsidiary and a joint venture operating in China. The SEC alleged that, from at 2010 to June 2013, employees and agents of the GSK’s Chinese operations engaged in transactions to corruptly transfer things of value to foreign officials and healthcare professionals to increase sales of GSK’s pharmaceutical products.
According to the Commission, the corrupt payments included gifts, coverage of improper travel and entertainment expenses, and cash. These improper practices were pervasive among representatives of the Chinese entities and condoned by management, the SEC contended, and were facilitated in part by the use of third parties that purported provided legitimate services. The costs associated with these payments were recorded in GSK’s books and records as legitimate expenses, such as associational sponsorships, employee expenses, conference fees, and marketing costs.
Throughout the period, GSK failed to devise and maintain a sufficient system of internal accounting controls and lacked an effective anti-corruption compliance program, the SEC stated, and these deficiencies also led to similar improper activities in other countries. By its conduct, the Commission alleged, GSK violated Exchange Act Sections 13(b)(2)(A) and (B).
Sanctions. In determining to accept GSK’s settlement offer, the Commission considered the company’s remedial acts, including its disclosure of findings from an internal investigation and its efforts to enhance its compliance programs and global risk assessment processes. GSK agreed to report to the Commission staff periodically on the status of its implementation of compliance measures and to provide a complete description of its Foreign Corrupt Practices Act and anti-corruption related remediation efforts. The company also agreed to cease and desist from further violations in addition to payment of the civil penalty.
The release is No. 34-79005.
Companies: GlaxoSmithKline plc
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