GlaxoSmithKline Plc Executives “Confess” To Bribery Allegations In China

Statement from Chinese authorities claim senior executives at GlaxoSmithKline plc (LON:GSK) have confessed to bribery charges.

Mark Rogers

As the Head of The Motley Fool’s UK Investing Team, Mark approaches the stock market with the same old-fashioned business instincts and values that he honed growing up around the family business. An investor for 20 years, Mark specialises in unearthing top-quality under-the-radar investments in the small-cap market. He currently serves as Director of Investing for Motley Fool UK services and Managing Director of Motley Fool UK.

Published 11 July, 2013 2:55 pm BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The shares of GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) dropped 1% to 1,744p during early afternoon trading following reports that some senior executives at the pharmaceuticals giant have become the target of a criminal investigation from Chinese authorities.

In a statement today, the Chinese Ministry of Public Security accused the GSK senior executives of bribing doctors and government officials in an attempt to boost Glaxo’s sales in the country. After being questioned, the unidentified suspects confessed to the charges, according to the report.

In a statement, GlaxoSmithKline responded:

“We continuously monitor our businesses to ensure they meet our strict compliance procedures – we have done this in China and found no evidence of bribery or corruption of doctors or government officials. However, if evidence of such activity is provided, we will act swiftly on it.”

In addition to these charges, GSK is accused of falsifying VAT receipts and other tax-related violations. According to Chinese authorities, “There are many suspects, the illegal behaviour continued over a long time and its scale is huge”.

With a market cap of over £85bn, GlaxoSmithKline’s shares trade at 15 times expected earnings, and offer a prospective dividend yield of 4.4%.

Of course, whether that valuation, today’s news and the wider prospects for the pharmaceuticals industry all combine to make shares of GSK a ‘buy’ remains your decision.

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> Mark does not own any share mentioned in this article.