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Exclusive: U.S. prosecutors add China bribe allegations to GSK probe

A no entry sign is pictured outside the GlaxoSmithKline building in Hounslow, west London June 18, 2013. REUTERS/Luke MacGregor
A no entry sign is pictured outside the GlaxoSmithKline building in Hounslow, west London June 18, 2013. REUTERS/Luke MacGregor

By Emily Flitter and Ben Hirschler

NEW YORK/LONDON (Reuters) - U.S. authorities are investigating British drugmaker GlaxoSmithKline Plc for violations of U.S. anti-bribery laws in China after Chinese government officials accused the company of bribing doctors, three sources familiar with the probe said this week.

The sources did not want to be identified because the matter is not public.

The investigation is part of a wider probe of drugmakers' sales practices in China, said one of the sources, adding that the Department of Justice has expanded a probe into GSK's business practices in other countries to include the Chinese bribery allegations.

A company spokesman on Friday confirmed the new line of inquiry in response to questions from Reuters.

"Since the investigation in China began, we have proactively reached out to relevant regulators. This includes the DOJ, and we have been in an ongoing dialogue with them," said David Mawdsley, a spokesman for GSK in London.

Chinese police said in July they had detained four Chinese executives at GSK on allegations the executives funneled up to 3 billion yuan ($489.92 million) to travel agencies to facilitate bribes to doctors to boost the sale of its medicines.

The U.S. Justice Department's probe is focusing on whether GSK and other drugmakers violated the U.S. Foreign Corrupt Practices Act, which forbids U.S. companies from engaging in bribery while doing business abroad.

Although GSK is a British company, U.S. law enforcement officials have jurisdiction over it because its shares are listed on a U.S. stock exchange. GSK's American depository receipts trade on the New York Stock Exchange.

Justice Department officials have been investigating GSK's sales practices in other countries for at least three years, according to the company's corporate filings. Expanding the probe to include China is a routine step, experts said on Friday.

GSK, which has not yet been subpoenaed on the China case, has said some of its senior Chinese executives appear to have broken the law. The company said in July it believes the alleged corruption involved senior Chinese staff working around its systems to potentially defraud the company, as well as cheating the Chinese healthcare system. It added that GSK's head office had no knowledge of the situation.

Peter Carr, a spokesman for the Justice Department in Washington, declined to comment.

(Reporting by Emily Flitter; Editing by Leslie Adler and Andre Grenon)

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